Primary financial institutions in China said the Chinese economy still has strong resilience despite mounting pressure. Among the increasing pressure is related to debt swelling and the ongoing trade war with the United States (US).

The PBOC (Peoples Bank of China) added that many Chinese households saved more, the business community was vibrant and there were large financial institutions that functioned well and many policy tools. The PBOC statement was revealed in a report on financial stability.

China: Economy ‘still operating within a reasonable range

“The PBOC will increase the flexibility and coordination of financial supply in serving the real economy while preventing financial risks,” the PBOC said, as quoted by Xinhua, Saturday, November 30, 2019.

On the other hand, the Chinese central bank placed so much stress on the significance of the financial market in preserving China’s real economic climate. At the PBOC meeting chaired by PBOC Governor Yi Gang, conference participants agreed that the financial sector had offered stable support to the real economy in 2019.

However, according to a statement released after the meeting, achieving stable macroeconomic and financial operations still faces a number of challenges, the downward pressure on the economy continues to increase, and social credit still faces pressures of partial contraction.

Yi said ongoing efforts must be made to strengthen counter-cycle adjustments and increase credit support for the real economy. He underlined that the increase in money supply and combined financing must be in line with nominal GDP growth.

“As for M2, the extensive gauge of the money supply which involves cash in circulation as well as all deposits, increased to as much as 8.4% YoY to 194.56 trillion yuan (around USD27.7 trillion at the end of October, PBOC data show.

M2 growth is the same as growth at the end of September. However, 0.4 points higher than the same period last year. Its growth this year is basically in line with nominal GDP growth.

Furthermore, Yi urged that the financial sector can play a full role in the role of the LPR mechanism in reducing real lending rates and continue efforts to increase bank lending capacity by replenishing capital.

“China will continue to implement wise monetary policies and see banks contribute more to financing the real economy,” the PBOC statement said

On a side note, while China’s economic climate is highly affected by its financial sector, the support of its primary institutions is overwhelming. And even if loans to the public is not easily accessible (except for settlement loans like car accident loans), they still manage to keep a strong economic climate.