China policymakers pledge
stability for 'complex' year ahead
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[December 30, 2016]
BEIJING
(Reuters) - China's economy is on a steady growth path as 2016 ends,
supported by a housing boom and billions in government investment, but
the mood of policymakers is more cautious than celebratory as they face
"complexity" in the new year.
Controlling risks has been a constant refrain in recent months as the
focus of policymakers switches to taming asset bubbles and checking
unbalanced growth stemming from efforts to fuel the economy with credit.
The central bank - while reaffirming a long-standing commitment to
prudent policy - said on Friday it would pay more attention to
maintaining a "neutral" stance and ensure that it is "neither too tight
nor too loose".
"At present, China's economic and financial operations are generally
stable, but the complexity of the situation cannot be underestimated,"
the People's Bank of China (PBOC) said.
Bank lending is on pace to top 2015's record 11.71 trillion yuan ($1.7
trillion), helping to stoke a housing boom that saw prices rise a
historic 12.6 percent year-on-year in November, while fixed asset
investment by state firms is growing more than 20 percent.
But growth has become more imbalanced this year as the effectiveness of
new credit declines and companies and individuals face mounting debts,
economists say.
![](http://archives.lincolndailynews.com/2016/Dec/30/images/ads/current/pacesetter_lda_041116.png)
Policy insiders expect monetary policy to tilt toward slight tightening
in 2017 as the government tries to strike a balance between supporting
the economy with ample credit and preventing a destabilizing build-up in
debt.
Central bank adviser Sheng Songcheng told Reuters in an interview on
Thursday that interest rates in China were already on an upward trend as
the economy improved.
MARKET STRESS
In the financial markets, China's blue-chip stock index ended the year
more than 11 percent lower while the Chinese yuan plumbed an 8-1/2 year
low.
Primary money rates rose this week and were largely higher this year,
driven by the PBOC's tighter liquidity stance in the second half aimed
at taming risks.
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![](../images/123016pics/busine15.jpg)
New properties are seen near a square in Zhengzhou, Henan province,
China, September 23, 2016. Picture taken September 23, 2016.
REUTERS/Yawen Chen/File Photo
![](http://archives.lincolndailynews.com/2016/Dec/30/images/ads/current/atlanta_bank_lda_LUAL_2016.png)
The
key interbank rate rose more than 25 basis points for the year, indicating
tighter monetary conditions, after falling sharply in 2015.
Market participants also said the falling yuan has had a large negative impact
on the money market in the second half, with the central bank buying up Chinese
currency and shrinking base money.
The PBOC said in Friday's report it would push reforms of the yuan regime, while
keeping the currency basically stable.
The central bank used the same wording about the currency in last year's report.
The yuan ended 2016 with its biggest annual loss since 1994, putting it on track
to be the worst-performing major Asian currency this year.
Expectations for a weaker yuan have contributed to significant capital outflows
as China's foreign currency reserves fall to the lowest level in more than five
years.
As Chinese firms step up overseas investment, which also contributes to capital
outflows, policymakers announced plans this week to further open China's markets
to foreign investment.
Any further opening up to foreign firms should help redress an imbalance in
investment flows which is likely to rise to an unprecedented 335 billion yuan
this year as outbound investment rose more than 55 percent in the first 11
months of 2016.
The state planning agency said on Friday the country would seek to open up, in
an "orderly way", sensitive areas such as telecoms, education and internet to
foreign investment.
(Reporting by Elias Glenn, Kevin Yao, Yawen Chen, Winni Zhou and Jackie Cai;
Editing by Ryan Woo and Robert Birsel)
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