BEIJING: China will pursue “neither loose nor tight” monetary policy to ensure basically stable liquidity, People’s Bank of China (PBoC) deputy governor Chen Yulu said.
The central bank would continue to implement “prudent and neutral” monetary policy, and create a “neutral and moderate” financial environment for supply-side reform, Chen told the Tsinghua PBCSF Global Finance Forum here.
Intensified measures by policy makers to cut financial leverage have spurred concerns over excessive tightening. The PBoC started to boost the cost of its money-market loans in the third quarter of last year, after the previous loosening cycle pushed benchmark interest rates to record lows.
Combined with a slew of tougher supervisory measures introduced by bank, insurance and security regulators, the PBoC’s tightening has made an impact. The seven-day repurchase rate, a benchmark for interbank liquidity, averaged 2.93% last month, the highest since March 2015, according to the National Interbank Funding Centre. Mainland stocks have also been whipsawed in the process.
Chinese leadership has been vocal about fending off financial risk this year. “China has entered into an era which requires greater attention to financial security than ever before,” Wu Xiaoling, former PBoC deputy governor and now dean of Tsinghua PBCSF, told the same forum.
The central bank wants to lead the financial institutions to return to their original role of supporting the real economy, and hopes enterprises will be focused on their core businesses, reversing the tendency of “blindly” stepping into the financial sector, Chen said.
Chen also said the central bank would beef up support to high-end manufacturing and the “weak links” in the economy, while boosting direct financing and cutting funding costs. – Bloomberg