China will maintain stimulus even as economy improves

[BEIJING] People's Bank of China (PBOC) Governor Yi Gang said the domestic economy is improving despite global uncertainty, and indicated the bank will continue with the current targeted easing approach.

China's measures to contain the spread of the virus and restart the economy are a "major strategic achievement", with production and people's lives going back to normal, Mr Yi said in an interview with local media on Tuesday. Even faced with global turmoil, the improving momentum of the domestic economy won't change, he said, according to a statement published on the PBOC's website.

Mr Yi also said targeted monetary measures to ensure sufficient liquidity, lower borrowing costs and provide cheap credit have worked well, and the PBOC plans to make its policy more precise and targeted in the future with innovative tools.

The remarks signal a continuation of the government's modest approach to monetary stimulus, even if some economists warned the economy could fall into a technical recession this quarter. Top leaders have abandoned a hard growth target for 2020, focusing instead on employment stability and poverty alleviation.

Talking about risks, Mr Yi said global economic fundamentals face severe challenges, and the global economic downturn "will very likely be worse than the global financial crisis in 2008 and even the Great Recession".

Domestically, the economic shocks caused by the pandemic are weighing on the quality of bank assets, Mr Yi said, calling for attention to small financial institutions especially. Banks will likely face increasing pressure from non-performing loans, and the PBOC will support them to replenish capital, he said.

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On the PBOC's digital currency plan, Mr Yi said there's still "no timetable" on a formal launch yet, and its current trials in some cities are part of "routine research and development".

BLOOMBERG