China’s Cenbank to roll out more policy measures to stabilize growth

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BEIJING, Jan 18 (Reuters) – China’s central bank will roll out more policy measures to stabilize the economy and stay ahead of the market curve as downward pressure persists, Vice Governor Liu Guoqiang said on Tuesday. following the latest rate cut.

The world’s second-largest economy, which has cooled over the past year, faces multiple headwinds in 2022, including continued weakness in housing and a new challenge from the recent local spread of the highly contagious variant. of Omicron.

“Before the downward pressure on the economy is fundamentally relieved, we should introduce more policies that are conducive to stability, and should not introduce policies that are not conducive to stability,” Liu said during the talk. ‘a press conference.

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“We need to hurry, make our operations forward-looking, move ahead with the market curve, and respond to general market concerns in a timely manner.”

Liu said the central bank would expand the use of its policy tools to prevent a credit “collapse”.

On Monday, the People’s Bank of China (PBOC) unexpectedly cut borrowing costs on its medium-term loans for the first time since April 2020. read more

Liu said the central bank still has room to cut banks’ required reserve ratios (RRRs), although that possibility has been reduced by cuts in the past.

The average RRR for financial institutions – the proportion of their deposits they must hold as reserves and not lend – stands at 8.4%, he said.

China’s macroeconomic leverage ratio fell 7.7 percentage points in 2021 to 272.5 percent, Liu said, adding that lower debt levels would create more room for monetary policy. He expects the ratio to be virtually stable this year.

LIQUIDITY

The PBOC would use various policy tools to maintain reasonably adequate liquidity and guide financial institutions to expand credit, especially for small businesses, technological innovations and green development, Liu said.

In 2022, the central bank would keep money supply and total social financing growth essentially in line with nominal economic growth, he said.

Sun Guofeng, head of the monetary policy department at the PBOC, said at the same briefing that the lending prime rate (LPR), the benchmark lending rate, would reflect changes in market interest rates comprehensively. and in a timely manner.

A drop in the LPR is widely expected on January 20, following the drop in the MLF rate.

The PBOC last cut the RRR by 50 basis points (bps) on Dec. 15, its second such measure last year. This was followed by a 5 basis point cut in the one-year loan prime rate (LPR), the benchmark lending rate, on December 20.

Authorities would maintain order in bank deposit markets to prevent low-quality banks from raising rates to attract customers, as high deposit rates could prevent banks from lowering lending rates, Liu said. vice governor.

Sun said cross-border capital flows may show some volatility due to developments in the international financial situation, but the impact of policy adjustments in developed countries, including the United States, would be limited.

The yuan’s exchange rate could deviate from its equilibrium levels in the short term, but in the medium to long term, market factors and government policy would help correct the deviations, Liu said.

Zou Lan, head of financial markets at the PBOC, said the central bank would maintain “continuity, consistency and stability” in real estate financial policies.

Property sales and financing were gradually returning to normal and market expectations were improving, he added.

At the end of 2021, China’s total home loans rose 7.9% from a year earlier to 52.2 trillion yuan ($8.22 trillion), 0.3 percentage points higher than the previous year. at the end of September, he said. ($1 = 6.3525 Chinese yuan renminbi)

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Reporting by Kevin Yao and Stella Qiu; Editing by Clarence Fernandez, John Stonestreet and Alex Richardson

Our standards: The Thomson Reuters Trust Principles.

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