China ‘Confident’ in 2025 Economic Rebound, Hong Kong is Key: Central Bank Chief

Mainland’s property market is improving, People’s Bank governor Pan Gongsheng says, reiterating importance of special-purpose bonds for buying idle land and unsold homes

· China will consider cutting interest rates and the reserve requirement ratio “to ensure ample liquidity and maintain a supportive environment” for lending, People’s Bank of China governor Pan Gongsheng said

[ABS News Service/14.01.2025]

China has the confidence, capacity and tools to ensure its economy recovers and grows this year, the country’s central bank chief said on Monday, pledging supportive monetary tools, measures to stem property market risks and tighter financial links between the mainland and Hong Kong.

Facing stubbornly weak domestic consumption and potential headwinds from US president-elect Donald Trump, China will consider cutting interest rates and the reserve requirement ratio “to ensure ample liquidity and maintain a supportive environment” for lending, People’s Bank of China governor Pan Gongsheng said during a 20-minute speech at the annual Asian Financial Forum in Hong Kong.

Beijing could also adjust and increase fiscal spending, he said.

“China will respond to the world’s expectations with responsibility and courage, continuing to play a key role as an engine of global economic growth,” Pan assured hundreds of foreign investors and China watchers.

The PBOC is the forerunner of China’s economic stimulus push – it was the first government agency to take concrete action as Beijing rolled out stimulus measures from September, and it is vital to market-liquidity adjustments, financing costs, yuan internationalisation, and Hong Kong’s role in Greater Bay Area and Belt and Road Initiative projects.

Pan specifically encouraged more “high-quality enterprises to list and issue bonds in Hong Kong”, to keep expanding mainland-Hong Kong financial-service connectivity, and to broaden two-way interest-rate swaps.

Authorities will also strive to further increase national foreign-exchange reserves allocated to assets in Hong Kong, he said.

Hong Kong has long positioned itself as an intermediary for Chinese and foreign business, including transactions on the city’s stock exchange.

Mainland Chinese market capitalisation on the Hong Kong main board and on the small to medium-sized business board rose by more than 3 percentage points last year, to 79.8 per cent of the total.

For the mainland property market, Pan reiterated previous government statements that local government special-purpose bonds can be used for acquiring idle land and unsold homes. He said this use of bonds will accelerate the destocking of the real estate market and help halt the sector’s decline.

The property sector is already improving, he added. The total sales area of commercial housing in 30 major Chinese cities has seen month-on-month growth for 90 days and year-on-year growth for two straight months, he said.

“Risks in the real estate market have significantly subsided, and overall market transactions have improved,” the governor said.

Property issues emerged in 2020 with new regulations chased by a series of defaults among real estate developers and a decline in home prices. Property worries, coupled with pressures in the Chinese job market, have dampened consumption in the world’s second-largest economy.

“We will make vigorously boosting consumption the first key task of this year’s economic work,” Pan said. He pledged a more “comprehensive” welfare system as one measure.

In Monday’s speech, Pan said the central bank would “resolutely” correct procyclical behaviour and other disruptive moves while striving to prevent the risk of the yuan exchange rate “overshooting”, to keep the currency stable.

“We are confident, well positioned, and capable of maintaining the stable operation of the foreign-exchange market,” he said.

“We will uphold the decisive role of the market in exchange-rate formation while effectively leveraging the exchange rate’s function as an automatic stabiliser for macroeconomic and international balance of payments adjustments.”