You are here
PBOC's Zhou touts prudent policy in new normal of slower growth
[BEIJING] China's central bank Governor Zhou Xiaochuan said money supply growth is still "appropriate" and a new normal of slower economic expansion doesn't mean there'll be a switch from a "prudent policy stance."
Mr Zhou, the People's Bank of China governor, said China is likely to remove the deposit-rate ceiling this year and will roll out a deposit-insurance system to start in the first half. He was speaking at a press conference in Beijing at the National People's Congress on Thursday.
Minutes before Mr Zhou's briefing started, data was released that showed M2 money supply rose 12.5 per cent from a year earlier in February. Premier Li Keqiang last week set the growth goal for M2 - the broadest gauge of money supply - at 12 per cent this year, down from 13 per cent in 2014. The actual expansion can be higher if necessary, he said.
Since November, the central bank twice cut interest rates and has lowered the amount banks must set aside as reserves to cushion the economy's slowdown. The PBOC is expected to make another 25 basis point interest-rate cut in the second quarter, according to a Bloomberg survey this month.
The PBOC announced a 25 basis point reduction in both benchmark deposit and lending rates on Feb 28 and raised the deposit rate ceiling to 130 per cent of the benchmark from the previous 120 per cent. That eases the financial repression that has seen China's savers subsidize the nation's investment-led growth.
At the NPC press conference a year ago, Mr Zhou said the country's deposit rates would be liberalized in one to two years, to expand the role of markets in financing.
The central bank is watching price data closely, said Yi Gang, a deputy central bank governor. China's consumer prices rose faster than economists forecast in February after the central bank stepped up policy easing and the Lunar New Year holiday pushed up food and transport costs.