zhou xiaochuan : prospects of the chinese economy – broad - based growth speech and q & a by mr zhou xiaochuan, governor of the people's bank of china, at the 32rd g30 annual international banking seminar, washington dc, 15 october 2017. * * * on october 15, 2017, governor zhou xiaochuan spoke on china ’ s economic prospects in the group of 30 ’ s international banking seminar in washington d. c. he attended this event on the margin of imf / world bank annual meetings. the following is the major content of his speech : china ’ s annual gdp growth rate has been declining for years, from double digit growth in the past to around 8 percent in 2012, then down further to 6. 7 percent in 2016. the momentum of gdp growth has picked up this year. the gdp growth was 6. 9 percent in the first half and is expected to reach 7 percent in the second half of this year. the driving force is mainly the fast growing household consumption. the gross retail sales volume grew at 10. 4 percent in the first eight months year on year. furthermore, household consumption is shifting from traditional product consumption to service consumption. therefore, development of service industry has accelerated. the added value of the tertiary industry as a share of gdp grew substantially from only around 40 percent 15 years ago to 55 percent currently. economic growth has supported stable employment situation. in the first eight months, about 10 million new jobs have already been created in urban china. given the size of chinese population, we need to have such a solid employment growth. the cpi and ppi grew at 1. 8 percent and 6. 3 percent respectively year on year, and nominal gdp growth is around 9. 5 percent. in terms of money supply and credit expansion, china has entered into a stage of deleveraging since early 2017. the growth of m2 has declined continuously to below 9 percent currently. the overall leverage ratio has started to decline. though the decline is still very moderate, the downward trend has been there. in the global financial crisis period, china adopted proactive fiscal and monetary policies in response. the total debt to gdp ratio went up substantially in the two years after 2009. but it is worth doing because the chinese economy recovered from the crisis quite quickly. now we need to find ways to bring the leverage ratio down. thanks to the positive international trade conditions, china ’ s performance in external trade has been good this year. so far, the trade

the financial markets and maintain financial stability. q & a session : david marsh ( managing director, omfif ) : it is sometimes said that there is a vacuum in leadership in the world. do you think it is about time for china to take a greater leadership role in the international monetary reforms? you mentioned a number of very positive developments in your speech regarding the chinese economy. it seems to provide a good platform for china to push forward some ideas about the reform of reserve currencies, the role of the sdr, institutionalizing the swap, and so on. 2 / 3 bis central bankers'speeches zhou xiaochuan : in recent years, along with rapid economic development, china has started to play a role in the international economic governance, including participating in the reform of reserve currency system and policy making in trade and financial stability. but china is still focusing very much on the domestic agenda, including further promoting economic development and regulatory reforms so as to keep pace with global development. we are pleased to see that imf has included the rmb into the currency basket of sdr. it ’ s encouraging and it will prompt china to adopt more reform and opening up policies, and support rmb to serve better as a freely usable currency. although china has strengthened cooperation with the international organizations, such as imf, bis and fsb, and participated in standard setting and rule making, we still have a long way to go in order to play a more significant role. as for the currency swap, it is an unexpected outcome of the global financial crisis. after the outbreak of the global financial crisis in 2008, due to the shortage of hard currencies and the difficulties in developing correspondent banking relationship on the part of commercial banks, some neighboring countries requested to enter into local currency swap agreements with china, in order to support and facilitate regional trade. we first signed an agreement with south korea, then with some asean countries and central asian countries. later on, the swap arrangements gradually expanded into other parts of the world, such as argentina, ukraine and egypt. therefore, currency swap arrangement is an unexpected outcome of the global financial crisis. china supports the further development of global safety net. in our view, the global safety net may be more efficient than bilateral arrangements. william r. rhodes ( william r. rhodes global advisors, inc. ) : last year, you expressed concern about the growing debt to gdp ratio. but you sound fairly optimistic about the issue this year. it seems that the government