China’s central bank to maintain accommodative policy as challenges persist
It will keep liquidity ample, keep prices reasonable, and lower the costs of banks’ liability and social financing
[BEIJING] China’s central bank said on Tuesday (Nov 11) that it would maintain an “appropriately loose” monetary policy, as the economy still faces risks and challenges.
The People’s Bank of China (PBOC) will keep liquidity ample, maintain prices at reasonable levels, and lower the costs of banks’ liability and social financing. It said this in its third-quarter monetary policy implementation report.
China is due to release the October credit data this week, and other indicators of economic activity such as retail sales, industrial output and investment, on Friday.
All of those figures are forecast to come in weaker than in September, which would confirm earlier data that suggested that the economy has lost some momentum, amid persistently weak domestic demand and US tariffs.
The PBOC said it will adjust counter-cyclical and cross-cyclical policies, in response to changes in the economic and financial situation.
It will also monitor changes in the monetary policies of major overseas central banks.
It did not elaborate.
“There are currently many external instabilities and uncertainties, with the international economic and trade order facing severe challenges,” the central bank said.
“Global economic growth momentum is insufficient, major economies are showing divergent performances, and China’s economy still faces numerous risks and challenges,” it added.
The central bank will maintain reasonable parity among various types of interest rates, including its policy rate and market rates, banks’ deposit rates and lending rates, it said.
“Maintaining reasonable interest rate parity is essential for the effective transmission of monetary policy,” the central bank said.
Chinese policymakers have refrained from aggressive stimulus this year.
They have kept a firm grip on the yuan currency, despite the trade war with the US and a prolonged property crisis, which have weighed heavily on consumer and business confidence.
The PBOC has held interest rates steady for five months, partly due to resilient exports, as the world’s second-largest economy has pushed hard to diversify its export markets away from the US.
US President Donald Trump and Chinese President Xi Jinping agreed late last month to trim their tit-for-tat tariffs, and pause a raft of other measures for one year.
But US-bound Chinese goods still face hefty levies, and economists warn that trade tensions will persist.
China has recently unveiled some targeted fiscal policy support measures.
However, analysts remain divided on whether the central bank will implement further easing measures, such as interest rate cuts, by the end of the year. REUTERS
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