China should be "very cautious" on stimulus -Yi Gan

China should be "very cautious" on stimulus -Yi Gan

The Chinese government should be "very cautious" in implementing any economic stimulus programme because they tend to be less efficient than natural market forces in boosting growth, a vice governor of the People's Bank of China said on Thursday.

Yi Gang also told a conference ahead of the spring meetings of the International Monetary Fund and World Bank that Chinese gross domestic product growth of "a little bit more, a little bit less" than 7.5 per cent is acceptable. Last year, China's economy expanded by 7.7 per cent.

"Any kind of stimulus package should be very cautious in the sense that you should believe that the market driver is the natural and the most efficient way to grow, and a stimulus growth driver is not as efficient as the natural market driver,"Yi said. "And the government and the central bank should be very cautious."

Touching on the recent volatility in China's currency, the yuan, Yi said two-way fluctuations are "normal." US officials have voiced concern about the yuan's recent weakening against the dollar after officials in China allowed the currency's daily trading band to widen. "In the first quarter of this year, we had several things happen," Yi said.

"The US Federal Reserve had the tapering, and (we) have the increase for our trade deficit." "So that I would say that the two-way fluctuation of the renminbi would be a normal phenomenon," Yi said.

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