PBOC's support to focus on small firms, green energy

Beijing

CHINA'S central bank will focus on keeping monetary policy stable, with support targeted towards small businesses and environmentally-friendly projects, governor Yi Gang said.

"As the pandemic is gradually contained and economic activities resume, we have phased out some temporary supportive measures, but our support to small and medium enterprises and green finance will continue," Yi said at the virtual Eurasia Forum in Budapest on Thursday (Nov 18). "We have focused more on maintaining the consistency, stability and sustainability of monetary policy."

Yi's comments are consistent with policymakers' recent guidance to "fine-tune" policies rather than flood the economy with support as growth weakens. The People's Bank of China (PBOC) has taken small, targeted steps such as providing cheap loans for green projects, rather than broad action such as cutting interest rates to spur the economy. The PBOC will use structural monetary policy tools to help achieve the country's long-term goal of achieving neutral carbon emissions, Yi said. While pursuing a greener future may affect the economy negatively in the near term, it is important to strike a balance in terms of policy responses, he said.

The governor added that policymakers in major countries may face new dilemmas trying to coordinate monetary and fiscal support as the world economy gradually recovers.

"As policymakers are phasing out stimulus measures, they might find it's more difficult to coordinate between monetary and fiscal policies," said Yi, noting that global economic recovery has slowed since the middle of this year due to repeated virus outbreaks, shocks to global supply chains and a surge in energy prices. At the same time, global inflation has sharply increased, and the question over whether price pressures are transitory remains under debate, he said.

Against the backdrop of multiple uncertainties in the global economy, countries should enhance policy coordination and cooperation on important global issues, such as climate change, he said. BLOOMBERG