ThePaper.cn:

How was China's macro leverage ratio in the first half of this year? What does the central bank predict the ratio will be in the second half? Thank you.

Ruan Jianhong:

Thank you. I will answer your questions. The PBC has always paid attention to changes in the macro leverage ratio. Since the fourth quarter of 2020, significant advances have been made in stabilizing the leverage and promoting growth. The macro leverage ratio has been in net decline for five consecutive quarters, leaving valuable policy space for coping with various complex issues in the future. In the global context, after the outbreak of the pandemic, the increase in China's macro leverage ratio was significantly lower than in other major economies. We were able to support the rapid economic recovery with relatively few new debts. At the end of 2021, the leverage ratios of America, Japan, and the Eurozone were 25.7, 39.5, and 21.4 percentage points higher than at the end of 2019, respectively. During the same period, the increase in China's macro leverage ratio was 16.5 percentage points, significantly lower than in other major economies. Meanwhile, China's economic performance continued to lead, and inflation was generally under control. From the perspective of policy effect, the moderate growth of China's macro leverage ratio has supported an optimal combination of "higher growth and lower inflation." All this demonstrates that our macro policies are strong, sound, and effective.

In the first quarter of 2022, China's macro leverage ratio stood at 277.1%, 4.6 percentage points higher than at the end of last year. Since the start of this year, downward pressure on the economy has continued growing because of the unexpected changing international situation and the latest COVID resurgence. The macro leverage ratio, a ratio of a country's total debt to gross domestic product, always increases when economic growth slows. Meanwhile, to respond to the downward pressure and achieve stable macroeconomic performance, we have further planned a package of measures to stabilize the economy. These counter-cyclical macro-regulation policies can affect debt growth in the current period, but their impact on output will not show up until later. As a result, the macro leverage ratio will witness a temporary increase. It is a fair reflection of external shocks, as well as a result of counter-cyclical macro-regulation policies, helping maintain stable macroeconomic performance.

It is clear that despite increasing risks and challenges confronted by China's economy this year, the fundamentals that sustain economic growth remain unchanged. As the country's epidemic situation continues to improve and a package of policies and measures to stabilize the economy begin to deliver, China's economic recovery is gaining steam, creating conditions for maintaining a reasonable macro leverage ratio. Thanks.