of around 7 per cent and reflects progress in addressing vulnerabilities, particularly a much needed moderation in real estate investment. this is also nothing new, as we have known for some world economic outlook, imf, october 2015. bis central bankers ’ speeches time that china is slowing and that a rebalancing towards consumption - led growth and what the people ’ s bank of china ( pboc ) has termed the „ new normal [UNK] is under way. what this entails is growth of around 6 to 7 per cent over the next 5 years, significantly lower than the double digit levels that we had become accustomed to. what was of note however, was the recent market correction of share prices, following a period of extraordinary growth whereby equity prices in china grew by almost 160 per cent between mid - june 2014 and 2015. the correction in the stock market resulted in an outflow of capital, exacerbated by the double devaluation of the renminbi in august. chinese authorities undertook a number of measures to stabilise markets, including a cut in the benchmark interest rates and regulatory reserve requirements, relaxed rules on margin financing, a restriction on short - selling, pledging central bank liquidity support for the china securities finance corporation and initiating a share buyback programme for state - owned enterprises. it is also speculated that the pboc spent over us $ 90 billion defending the currency in august alone 2. however, the imf and pboc do not believe that the stock market correction will derail the ongoing adjustment to a slower yet more balanced growth path. it is generally agreed that this adjustment is preferable to relying on an unsustainable growth model of excessive credit and investment, which could lead to large vulnerabilities in the fiscal, real estate, financial, and corporate sectors. in line with the above mentioned slower growth forecasts, recent indicators such as the manufacturing pmi, point to weaker growth for the remainder of the year. as imports continue to fall faster than exports, china will likely record a large trade surplus. china ’ s current account surplus on the other hand, has come down from heady levels of around 10 per cent of gdp, to current levels of around 2. 7 per cent of gdp. indeed, the recent article in the economist titled “ the great fall of china ”, asserts that this is not the hour of china ’ s crisis and that the financial tumult is misleading. while questions remain about

1 per cent in december. during the first six months of 1997, it peaked at 17. 4 per cent in april, and then declined only marginally to 16. 3 per cent over the twelve months up to june. as in the case of the money supply, the total amount of bank credit outstanding has risen as a percentage of gross domestic product over the past few years. at the end of june 1997, it amounted to 75 per cent of gross domestic product, compared with 67 per cent at the end of 1993. bank credit is, of course, not only extended for the purpose of financing purchases of goods and services. indeed, particularly in recent months, a substantial amount of the additional bank credit created may have been linked to the explosive increases in the volume of transactions in the financial markets, particularly in the equity and bond markets. nevertheless, all forms of bank credit create money, and the initial reason for which money is created is only of limited significance for monetary policy purposes. once the money has been created, it becomes part of the amorphous pool of the total money supply and, depending on the strength of the multiplier effect, is available to be used a number of times over, and for many purposes other than its first application. many explanations can be offered for the persistently high rates of increase in bank credit extension and in the money supply, despite the slowdown in real economic activity over the past eighteen months. it could partly be linked to a switching of international trade financing from foreign to domestic sources, or partly to the financing of summer crops in the agricultural sector that are being harvested late this year. it is also known that bank credit extended to local authorities increased by no less than r2. 7 billion from 31 december 1996 to 30 june 1997. these explanations, however, do not detract from the need for a curtailment of the excessive rates of increase in these important monetary aggregates at this juncture. in light of the unfavourable experiences of a number of other countries in recent years, ranging from a well - developed country such as japan to an emerging economy such as thailand, central bankers elsewhere are increasingly concentrating on restricting the provision of bank credit for investment in financial assets and property. in a bull market, even at high interest rates, borrowers will continue to borrow funds to buy assets that are rapidly appreciating in value ; and banks will continue to lend because the value of their collateral is rising. this could easily cause