Regulatory policy

Conventional politics gets PBOC vote

A staff member works on a Konka micro/mini LED production line in Chongqing. [Provided to China Daily]

Legislature said current interest rates help ensure stable price levels

China will increase credit support for the real economy and keep the value of its currency stable by sticking to conventional monetary policy, Yi Gang, governor of the country’s central bank, said Friday.

Experts said Yi’s remarks show that the People’s Bank of China, the country’s central bank, has room to take further accommodative measures to effectively shore up China’s economic recovery, which is still under pressure from coronavirus outbreaks. COVID-19 and the real estate downturn.

“China has the conditions to maintain conventional monetary policy for as long as possible, preserving the stability of the value of its currency,” Yi said, presenting a report on China’s financial development and regulation to the session in March. course of the Standing Committee of the National People’s Congress. , China’s highest legislature, for consideration.

“Since the COVID-19 outbreak, China has not resorted to unconventional monetary policy adjustments such as quantitative easing and negative interest rates, making it one of the few major economies to implement conventional monetary policy,” Yi said.

China’s interest rates are considered to be at an average level in a global context and at a low level among major developing economies. This has ensured stable price levels and effectively promoted economic growth, Yi said.

Going forward, the PBOC will maintain reasonably adequate liquidity to strengthen credit support to the real economy, deepen interest rate reforms to reduce real interest rates faced by businesses and individuals, and strengthen managing expectations to keep the renminbi exchange rate generally stable, he said.

Conventional monetary policy refers to the use of standard and traditional monetary tools such as adjusting interest rates and reserve requirement ratios.

This concept contrasts with unconventional monetary policy, which uses unconventional tools like quantitative easing to help smooth out business cycles. Unconventional monetary policy is increasingly embraced globally, as the leeway for traditional measures is exhausted or deemed insufficient to stimulate the economy.

Yi’s remarks indicate that the PBOC still has adequate standard monetary policy tools, such as a reduction in the RRR, to shore up China’s economic recovery, while aggressive money printing that could deflate the renminbi remains unlikely. said experts.

“The country has some breathing room, so monetary and fiscal accommodation can be maintained, and there is room for more robust support targeted at vulnerable households,” the International Monetary Fund said. in its Regional Economic Outlook: Asia and the Pacific, released on Friday.

Ye Yindan, a researcher at the Bank of China Research Institute, said the country should maintain stable financial conditions in the coming months, with a reduction in the RRR as one of the possible measures to maintain reasonable liquidity. abundant.

To strengthen support for the real economy, banks will be encouraged to boost credit expansion and stimulate new market demand with innovative financial services, PBC Governor Yi said.

Efforts will be made to ensure that necessary capital for major projects is in place as soon as possible to support infrastructure construction, Yi said, adding that the country will maintain steady and orderly financing for the real estate sector.

The country’s outstanding property development loans reached 12.67 trillion yuan ($1.75 trillion) at the end of September, up 2.2 percent year on year, marking an acceleration from a 0.2 decline seen a year earlier. quarter earlier, according to PBOC data on Friday.

Yi said the country will also study the unveiling of laws and regulations related to e-CNY, China’s central bank digital currency, expand real estate investment trust trials and deepen high-level financial opening-up. by facilitating investment in the country’s financial markets.