China Downplays Dangers as Zhou Sees 7% to 8% Growth: Economy

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China Downplays DangersChina’s Finance Minister Lou Jiwei played down yuan declines and the risks from shadow banking as central bank GovernorZhou Xiaochuan signaled that the nation’s economy can sustain growth of between 7 percent and 8 percent.

Expansion prospects are suitable and can boost global economic growth, Zhou said. Possible defaults in some wealth-management products don’t reflect a “big problem” and recent yuan weakness is within a normal range, the finance minister told Bloomberg News.

China is stressing the resilience of its economy even as efforts to rein in leverage and expand the role of markets have prompted analysts to forecast the slowest pace of expansion since 1990. The yuan last week had its biggest weekly slide against the dollar since 2011 and stocks tumbled today on concern banks have tightened property lending.

“There will be ups and downs,” Lou said yesterday of recent declines in the yuan. The currency’s movement is “within normal range” and doesn’t indicate a change in economic fundamentals, he said.

Group-of-20 policy makers meeting in Sydney pledged a coordinated push to add the equivalent of $2 trillion to the global economy through faster growth over the next five years. The G-20 communique singled out Chinaamong emerging nations exhibiting “continued solid growth,” changing the language from a draft seen by Bloomberg News that hadn’t named the world’s second-largest economy.

Credit Growth

A gauge of real-estate shares fell the most in eight months today. New-home prices rose from a year earlier in January in 69 out of 70 cities tracked by China’s statistics bureau, a report showed today.

New credit in China rose to a record in January, underscoring the risk of financial turbulence from defaults and bad loans, and the increasing amount of financing required to generate gross domestic product.

Shadow banking in China is more closely linked to the real economy than it is in western countries, Lou toldBloomberg News Feb. 22. The scale of the sector is not large in general, but it has grown fast recently and the PBOC is dealing with it cautiously, according to a statement yesterday posted on the central bank’s website.

Yuan Drop

The offshore yuan fell 1 percent to 6.0933 per dollar last week, a decline unseen since September 2011.

There’s “no big problem” for China to maintain steady and healthy growth, Zhou told Bloomberg News Feb. 21. “Uncertainty is always present and there’s nothing big to worry about.”

Global growth will accelerate to 2.9 percent in 2014, the quickest pace in three years, according to the median of forecasts compiled by Bloomberg. It will be 3.1 percent the following year. China’s GDP will increase 7.5 percent in 2014, slowing from 7.7 percent in 2013, the data show.

China’s economy will this year maintain the same trend of steady growth as it did last year, Lou said Feb. 22. Developed countries are too optimistic about their own growth, he said.

China’s services industry has overtaken manufacturing while its contribution to global growth is about 30 percent, Lou said in a statement posted on the People’s Bank of China website. The Asian nation will try to boost investment and consumption demand by pushing ahead with urbanization, he said.