5 Nov 2013
China's Li sets min GDP at 7,2%, warns against stimulus
FXstreet.com (Barcelona) - The Chinese economy should keep its growth rate levels at 7.2% or above to keep generating enough jobs, said Premier Li Keqiang, also underscoring that relying too much on short term liquidity injections/stimulus should not be the primary focus as it risks similar fiscal problems faced by the Euro zone.
Based on early projections, Li said Q3 economic indicators are in line to meet yearly targets, while warning looser policies should be avoided, saying that money supply - M2 - stands at a dangerous CNY100 trillion, twice China's GDP.
According to Li, cited by MNI, in comments made in an October 21 speech made public Monday: "We have too much money in the pool. If we print more money, it may cause inflation. We all know bad inflation will not only disturb markets but also have big side effects and pressure people's lives and even cause panic."
"Facing these conditions we didn't panic. We stuck to the rule of neither loosening nor tightening liquidity. We required the PBOC and commercial banks to step up liquidity management and maintain appropriate money supply but we did not ease liquidity as a result of this. We want to stabilize growth to guarantee employment, Li said, MNI informs.
Li added: "Stabilizing growth can expand the deficit and increase money supply. Doing so may have an immediate effect within this year but short-term stimulus policies aren't sustainable. There needs to be enough room for fiscal and monetary policy, but our deficit ratio is already 2.1%."
The comments are published ahead of the third plenum by the Communist Party, scheduled this weekend, and widely reported to be a key meeting as structural economic policies on China's reform will be discussed, including deregulation and liberalization.
Based on early projections, Li said Q3 economic indicators are in line to meet yearly targets, while warning looser policies should be avoided, saying that money supply - M2 - stands at a dangerous CNY100 trillion, twice China's GDP.
According to Li, cited by MNI, in comments made in an October 21 speech made public Monday: "We have too much money in the pool. If we print more money, it may cause inflation. We all know bad inflation will not only disturb markets but also have big side effects and pressure people's lives and even cause panic."
"Facing these conditions we didn't panic. We stuck to the rule of neither loosening nor tightening liquidity. We required the PBOC and commercial banks to step up liquidity management and maintain appropriate money supply but we did not ease liquidity as a result of this. We want to stabilize growth to guarantee employment, Li said, MNI informs.
Li added: "Stabilizing growth can expand the deficit and increase money supply. Doing so may have an immediate effect within this year but short-term stimulus policies aren't sustainable. There needs to be enough room for fiscal and monetary policy, but our deficit ratio is already 2.1%."
The comments are published ahead of the third plenum by the Communist Party, scheduled this weekend, and widely reported to be a key meeting as structural economic policies on China's reform will be discussed, including deregulation and liberalization.