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China central bank chief says to maintain prudent policy as economy slows
[BEIJING] China has no need to change its prudent monetary policy stance, central bank governor Zhou Xiaochuan said on Thursday, after a raft of data suggested the world's second-largest economy lost further momentum early in the new year.
"The new normal condition is not special. There are problems, (but) this does not necessarily require a new monetary policy formula," Mr Zhou told a news conference during China's annual parliamentary session in Beijing.
Money supply growth is appropriate, while policy adjustments have kept liquidity levels at appropriate levels, Mr Zhou said.
Data released so far for early 2015 show the economy may already be at risk of missing the government's newly-minted growth target of around 7 per cent for this year, which itself would mark a quarter-century low. Leaders have described the target as the "new normal", acknowledging pressures on growth while reiterating their commitment to reforms.
Growth in investment, retail sales and factory output all missed forecasts in January and February and fell to multi-year lows, leaving investors with little doubt that the economy is in need of further support measures.
Exports picked up in the first two months but imports slid some 20 per cent, pointing to persistent weakness in the economy, while deflationary pressures in the factory sector have intensified.
New loans in January and February combined were well below the same period in 2014, though they easily beat expectations for February alone.
China is likely to cut interest rates or reserve requirements again if consumer inflation drifts below 1 per cent, a member of the central bank's monetary policy committee told Reuters on Wednesday, as he ruled out more support for the sagging property market.
The central bank has cut interest rates twice since November, and in early February reduced the amount of cash that banks must hold as reserves (RRR), freeing up fresh liquidity to flow into the economy to offset rising outflows of capital.
While the government has insisted it will not roll out a massive stimulus programme like the one it unveiled during the global financial crisis, fearing an even bigger build up of debt, economists say the central bank has embarked on its most aggressive easing campaign since 2008/09 as it seeks to avert a sharper economic slowdown.
Weighed down by a property downturn, widespread factory overcapacity and rising debt - the world's second-largest economy grew 7.4 per cent in 2014, the slowest pace in 24 years, even after a raft of stimulus measures.