Date
23 January 2017
Zhou Xiaochuan says China’s housing market still faces de-stocking pressure as property prices remain volatile across the country. Photo: Reuters
Zhou Xiaochuan says China’s housing market still faces de-stocking pressure as property prices remain volatile across the country. Photo: Reuters

Some takeaways from China’s ‘two sessions’ menu

China’s annual “two sessions” of its legislative and political elite will end soon.

Already, the meetings are noteworthy for Beijing’s decision to make a stable economy a top priority.

Central bank governor Zhou Xiaochuan said China’s housing market still faces de-stocking pressure as property prices remain volatile across the country.

He said China will rely on domestic demand, rather than exports, to boost growth and that it will continue to adopt a prudent monetary policy.

Some first and second-tier cities have seen rising property prices in recent months.

As a result, the central bank wants local governments to play a more active role in policy guidance.

Also, it’s urging commercial banks to tighten risk management on mortgage loans and peer-to-peer lenders to comply with regulations and increase transparency.

Zhou said renminbi internationalization and the development of the offshore renminbi market should be a market-driven process.

He said monetary macro policy and financial infrastructure remain an issue for most countries.

But some problems and loopholes have been identified.

He said China should draw from the experience of other countries that have a much longer history of financial market development.

Meanwhile, the onshore and offshore bond markets are still at a very early stage of development.

But even with a small base, these could achieve extraordinary growth, he said.

As China increasingly opens up to the world, there will plenty of room for internationalizing the renminbi and related bond products.

Zhou said the onshore bond market has vast potential, with China shifting to the debt and equity markets to raise finds instead of relying on bank financing.

Also, the PBoC said it’s normal to see capital outflows and that money is in fact entering the real economy. Two-way flows are expected to remain normal.

The stock market has been closely watching the launch of a registration-based system for initial public offerings.

Liu Shiyu, the new chairman of the China Securities Regulatory Commission, said it is necessary but will take time.

The IPO registration system is key to the healthy development of the capital market, Liu said.

Liu said the market has had time to recovery after the government stepped up efforts to stem a slide in the stock market last summer.

He said it’s too early to talk about the end of share purchases by China Securities Finance, the government body responsible for propping up equities during the stock market crash.

Liu said the long-awaited Shenzhen-Hong Kong Stock Connect will be launched this year.

This article appeared in the Hong Kong Economic Journal on March 14.

Translation by Julie Zhu

[Chinese version中文版]

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JZ/JP/RA

Senior investment banker

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