With economic expansion having moderated to a "new normal" pace, potential GDP growth will still be about 8 percent this year and in the next 20 years, said Justin Yifu Lin, former chief economist² and senior vice-president of the World Bank.

 

His comments came during a news conference at the Third Session of the 12th National Committee of the Chinese People's Political Consultative Conference.

 

China still has huge development potential in many industries, such as equipment manufacturing, e-commerce, Internet finance, alternative energy and environmental protection. Productivity should be continually improved by relying on technological³ innovation and industrial upgrading, he said.

 

The government reduced the 2015 GDP growth target to "around 7 percent" from "around 7.5 percent" in the past three years. Slower growth will provide more room for structural⁴ adjustments while maintaining a bottom line to ensure a stable labor⁵ market, according to the government work report.

 

Further moderation of economic growth will add pressure on commercial banks' lending activity, because more enterprises may face lower profits and even possible bankruptcy⁶. But it is unreasonable⁷ to say that China's banking⁸ sector⁹ will collapse¹⁰, said Yang Kaisheng, former president of Industrial and Commercial Bank of China Ltd.

 

"Downward pressure will increase in 2015 and commercial banks' ability to digest bad loans is important," said Yang.

 

Domestic banks' nonperforming loan ratio is relatively¹¹ low compared with the world's largest banks, he said.

 

Separately, People's Bank of China Governor Zhou Xiaochuan said on Friday that this year's broad money supply growth target will be more flexible, aiming to better support the real economy.

 

"M2 is an important indicator¹² of macroeconomic policy, but it is not necessary to fix it at a certain level," said Zhou. "It is more significant to set targets for new jobs, GDP growth and inflation to monitor the development," he said.

 

Although this year's M2 growth target was cut to 12 percent from 13 percent, consistent with a lower nominal¹³ GDP growth target, the government work report said that the actual outcome could be higher, suggesting that 12 percent may be better considered as a lower boundary.

 

The report also called for the use of both price and quantitative¹⁴ monetary¹⁵ instruments to help lower financing costs in the economy.

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