China's growth target of 5% will be reached, says central bank

China's central bank said on Monday that it expects the annual GDP growth target of around 5 percent will be reached, as the economy continues to return to the normal track. It also vowed to keep in place “prudent” monetary policy to ensure stable growth.

In its quarterly monetary policy report, the People’s Bank of China (PBOC) also noted both internal and external challenges, including heightened geopolitical tension globally, while maintaining that China’s long-term development fundamentals have not changed.

Pointing to emerging “favorable factors” for stable economic development, the PBOC report said “it is expected that the annual growth target of around 5 percent can be successfully achieved.”

China's economy grew by 4.9 percent year-on-year in the third quarter of the year, beating expectations. In the first three quarters, the economy expanded by 5.2 percent, which means that to reach the annual growth rate of around 5 percent, a GDP growth rate of at least 4.8 percent in the fourth quarter is needed.

While challenges remain, many analysts and global institutions also expect that China will be able to meet its annual growth target. The IMF, for example, has projected that China's GDP growth will reach 5.4 percent in 2023.

“It is expected that further policy intensification and the low base effect will support the moderate recovery of the economy in the fourth quarter, and GDP is expected to grow by about 5.3 percent for the whole year,” Wu Chaoming, deputy head of the Chasing Research Institute, told the Global Times on Monday.

However, there are also challenges facing the Chinese economy, according to the PBOC. Globally, geopolitical tensions have intensified, uncertainty in the world economy has increased, interest rates in developed economies have remained high, and spillover risks may still impact emerging market economies, the report said.

From a domestic perspective, the effectiveness of using debt to drive economic growth has decreased, the relationship between real estate supply and demand has undergone major changes, and the urgency of accelerating economic transformation has increased, according to the report.

“We should also note that from the perspective of the general trend of economic development, the fundamentals of China’s development have not changed,” the report said. The bank will also carry out macro policy adjustments and controls, and steadily promote high-quality development, while also maintaining a “reasonable” economic growth rate.

The central bank said that it will maintain a moderate and steady pace of monetary and credit aggregates, give full play to the guiding role of monetary and credit policies and ensure the internal and external balance of interest and exchange rates. It also vowed to deepen financial reform and opening-up and effectively prevent and resolve financial risks.

Wu said that further cuts to interest rates or the reserve requirement ratio cannot be completely ruled out, and monetary policy will largely remain “loose.”