CHINA’S central bank governor yesterday stressed tolerance for slowing growth in the short term as the world’s second-largest economy transitions away from property and infrastructure toward new drivers of activity.

People’s Bank of China Governor Pan Gongsheng told the HKMA-BIS High-Level Conference in Hong Kong that he was confident China’s economy will enjoy “healthy and sustainable growth” in 2024 and beyond, citing rising sectors like renewable energy.

He said China’s monetary policy would be kept accommodative, though inflation was “bottoming out” and was likely to pick up in coming months.

China’s economy gained momentum in recent months, paving the way for achieving the official growth target, he said.

The government has set a growth target of around 5% for this year.

“Over the past year or so, many central bankers around the world have been troubled by the problem of persistent high inflation, but for China, the problem is somewhat different,” Pan said.”Now, the CPI [consumer price index] is gradually bottoming out in China.”

China’s consumer price inflation is likely to pick up in the coming months as recent drops in food prices, and especially pork prices will not be sustained, Pan said.

He also downplayed concerns over risks related to property and local government debt issues.

“The traditional model of relying heavily on infrastructure and real estate might generate higher growth, but it would also delay structural adjustment and undermine growth sustainability,” Pan said.

“The ongoing economic transformation will be a long and difficult journey. But it’s a journey we must take.”

Pan reiterated that China’s overall government debt is relatively low compared with other economies, and stressed that debt was borrowed for infrastructure investment and backed by “tangible assets.”

The debt is also unevenly distributed within the country, he pointed out, saying that economically more advanced regions in central and eastern China won’t have a problem repaying their debt.

Pan said it would be difficult for China’s annual growth to hit the 8%-10% rates seen in the past as the economy has expanded in size. He cited a range of positive signals, though, from improving retail sales to a pickup in private investment when excluding real estate.

He said that the property market’s adjustment is beneficial for the economy in the long run. He also reaffirmed that spillover effects from the sector to the financial system are “quite limited.” (SD-Agencies)