BEIJING -- China's financial markets are expected to remain stable and the renminbi is not on course for a long-term devaluation, while fiscal spending will grow faster than expected this year, the country's top financial officials told Group of 20 central-bank governors and finance ministers. Chinese Finance Minister Lou Jiwei said that central government spending will rise 10 percent this year, more than the 7 percent growth budgeted at the beginning of the year, according to a statement on the People's Bank of China website late Saturday. China will raise dividend payments from designated state-owned enterprises to make up for any shortfalls.
China is headed for its slowest economic expansion in 25 years this year, and mainland markets have slumped 40 percent since mid-June, sending global financial markets skittering. Ailing Chinese shares dragged down Hong Kong stocks to their lowest close in two years Wednesday. China's financial markets were closed Thursday and Friday to commemorate the 70th anniversary of the end of World War II.
Growth in China's gross domestic product will remain around 7 percent, as predicted earlier in the year, and the new economic normal may last for four to five years, Lou said. The government will not particularly care about quarterly economic fluctuations and maintain steady macroeconomic policy, he added.
China can no longer rely on policy supports to achieve growth of between 9 and 10 percent, as it may already take several years to digest excess industrial capacity and inventories, Lou said. It will go through "labor pains" in the next five years as it aims to complete main structural reforms by 2020, he added.
However, the quality of growth is already improving with 7 million jobs created in the first half of the year, consumption overtaking investment in contributing to economic growth and the balance of payments becoming more even, Lou said.
Also at the G-20 meeting in Turkey Friday and Saturday, People's Bank of China Governor Zhou Xiaochuan reviewed the massive run-up and crash of Chinese equities, acknowledging its global impact in August. China's efforts, including the central bank channeling liquidity into the market, averted a precipitous slide and systemic risks, Zhou said. Leverage has decreased noticeably, and the real economy was not significantly affected. The yuan-US dollar exchange rate is relatively stable, the stock market is already roughly where it should be, and financial markets are expected to be stable, he said.
Earlier, G-20 officials said the Chinese devaluation of the yuan in August and the stock-market plunge were all part of a difficult path to a more liberal economy.
(Reporting by Jake Spring; Editing by Himani Sarkar)