China's central bank head says economy to expand about 2% this year

By Leika Kihara

TOKYO (Reuters) - China will see its economy expand by about 2% this year as it has got the coronavirus pandemic under control, central bank governor Yi Gang said on Sunday, signalling confidence about the prospects of a domestic demand-driven recovery.

His remark comes ahead of Monday's closely watched gross domestic product (GDP) data, which is likely to show the world's second-largest economy grew 5.2% in July-September from a year earlier.

"I think the accumulative growth for the first three quarters of this year will be positive ... For the whole year, we predict China GDP growth of around 2%," Yi said.

"The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery," he said in an online International Banking Seminar of the Group of 30, an independent body of economic and financial leaders from the public and private sectors and academia.

China's fiscal and monetary policies will focus on helping small and medium-size firms weather the pain from the health crisis, while ensuring that domestic demand plays a bigger role in boosting growth, he added.

Yi said China's currency rate was appreciating against the U.S. dollar "significantly" in the past three months reflecting interest-rate differentials between the two countries - a development he said should be left to market forces.

"Monetary policy should focus on domestic demand, domestic inflation targeting ... and let the market decide the exchange rate," he said.

China's economic outlook has turned more optimistic on aggressive government stimulus, with recent data pointing to a steady improvement from the COVID-19 health crisis.

While the central bank stepped up policy support earlier this year after widespread travel restrictions choked economic activity, it has more recently held off on further easing.

(Reporting by Leika Kihara; Editing by David Clarke and Alexandra Hudson)