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China's economic fundamentals 'in good shape'

(Xinhua)
Updated: 2008-12-27 12:45

Yi Gang, a senior official of China's central bank, said Friday that the nation's economic fundamentals are "in good shape" and urged people to have faith in the country's growth.

Yi, vice governor of the People's Bank of China (PBOC), said his assessment is based on the balance sheets of residents, enterprises, the financial sector and the government, which are all in a "healthy" state.

Related readings:  PBOC: China can weather crisis  Fiscal incomes feel slowdown pinch  Bank deposits up as stocks fall out of favor  Brokers confident about 8% GDP growth in 2009

Bank savings of residents have exceeded 20 trillion yuan ($2.92 trillion), while their loans, including those for cars and housing, added up to merely 3.7 trillion yuan, Yi told a financial forum here.

Deposits of Chinese residents stood at 20.8 trillion yuan at the end of September.

"This indicates that the debt level of Chinese households is quite low and such balance sheets are very healthy, compared with those for US and European households, making it possible to create room for development," he said.

Zhou Xiaochuan, PBOC governor, who also attended the China Finance Forum 2008, said the country needs to expand domestic consumption at the same time as it increases investment, to achieve the goal of spurring domestic demand.

Yi said corporate finances are also relatively healthy.

"The average debt to assets ratio of 5,000 non-financial enterprises monitored by the central bank is 55 percent," which is below previous figures, he said.

Yi added the country's lenders as a whole have a very high capital adequacy ratio with a low non-performing loan ratio, and he stressed that the financial sector is capable of supporting the economy.

Liu Mingkang, chairman of the China Banking Regulatory Commission, told the forum that the total assets of the banking sector stood at 61.1 trillion yuan as of the end of November.

He said that 193 banks, which hold 99.5 percent of the sector's total assets, have met the required capital adequacy ratio.

The financial condition of the Chinese government is also "within the healthy range," Yi added, citing national debt and the fiscal deficit.

National debt accounted for about 22 percent of gross domestic product (GDP) at the end of last year, compared with 71 percent for the United States, 67 percent for the Euro zone and 163 percent for Japan, he said.

The fiscal deficit stood at a smaller proportion of GDP than in other countries, he said.

"The figure next year will remain relatively lower than other countries despite a possible increase," he said.

"Both are good for the implementation of an active fiscal policy," he told the forum.

China's economy grew 9 percent in the third quarter, the slowest pace in five years, as the global financial crisis sapped demand for Chinese goods and domestic industrial production waned in response to weak demand and rising raw material costs.

The government announced a huge 4-trillion-yuan stimulus package in November and switched to "active" fiscal and "moderately loose" monetary policies in order to boost the economy.

The central bank has cut interest rates five times since September, and the government is striving to achieve 8 percent economic growth to create enough new jobs and ensure social stability amid the turmoil of the global crisis.

However, economic data released since last week showed further risks of a slowdown. November exports declined year-on-year by 2.2 percent, the first monthly decline since June 2001.

Yi maintained, however, that GDP growth would be about 8 percent next year.