[BEIJING] China's central bank does not need to buy bonds or securities to boost liquidity as traditional policy tools will do the job, the central bank said on Friday as it warned of a cloudy economic outlook.
In its quarterly monetary policy report, the People's Bank of China (PBOC) said it had scope to use a variety of policy tools to adjust liquidity levels and growth in money supply.
The PBOC's latest denial that it may buy securities to loosen policy, also known as quantitative easing, came in the wake of market speculation that such a move was on the cards as the Chinese economy stutters. "Currently, there is considerable room for various monetary policy tools to effectively adjust and provide liquidity, and there is no need to sharply increase liquidity levels through quantitative easing," the PBOC said.
Policymakers will use "a variety" of tools to "maintain an appropriate level in liquidity and achieve reasonable growth in money supply, credit and social financing", the bank said in the report that was posted online.
The remarks came just hours after data showed China's import and export shipments tumbled again in April, badly missing forecasts and raising concerns that the stumbling Chinese economy was losing more steam.
That stoked worries that China's economy could cool further to grow less than 7 per cent in the second quarter, for the first time since the depths of the 2008/09 global financial crisis.
The central bank acknowledged the dangers. It said China had a benign inflation outlook and that the economy faced difficulties in the short term. Yet, it said the economy was likely to continue growing at a healthy rate nonetheless.
Using stock phrases to describe its policy stance, the PBOC said policy would be neither too tight or loose and would be fine-tuned in a timely manner. Previous policy easing measures are also expected to gain traction, it said.
To energise the foundering economy, China's central bank has cut interest rates and relaxed reserve requirements four times in six months and is widely expected to act again to arrest the slowdown.
Hurt by a housing slump and faltering growth in exports, investment and factory output, growth in the world's second-largest economy cooled to a six-year low of 7 per cent in the first quarter.