China’s central bank to ensure funds are more efficiently used

THE People’s Bank of China vowed to better utilise existing funds and make sure they flow into the real economy, following a key twice-a-decade financial policy meeting.

The PBOC pledged to improve efficiency of existing loans and unclog channels through which funds go into the real economy, a term that refers to non-financial sectors, in an article written by its monetary policy department published on Friday (Nov 3). The article is in response to the Central Financial Work Conference that took place earlier this week.

The central bank will “utilise financial resources that are occupied and used inefficiently and enhance the efficiency of funds,” it said in the article. “We need to take a longer-term perspective” to better grasp the goal of keeping money supply and aggregate financing expanding at a similar pace as nominal economic growth, according to the article.

The central bank will also step up management of the foreign exchange market to keep the yuan exchange rate basically stable on a reasonable equilibrium level, it said. 

China’s growth recovery remains fragile, with factory and services activity performing worse than expected in October. Expectations are growing for the central bank to provide more liquidity support via a cut in the reserve requirement ratio – the amount of cash banks must keep in reserve – in the coming months. BLOOMBERG