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China to Dig Into Monetary Policy Toolbox to Stabilize Economy -Breaking

by Mike Robinson

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© Bloomberg. People’s Liberation Army soldiers pose in front of People’s Bank of China on Monday 13 December 2021 in Beijing. Economists predict China will start adding fiscal stimulus in early 2022 after the country’s top officials said their key goals for the coming year include counteracting growth pressures and stabilizing the economy. Photographer: Andrea Verdelli/Bloomberg

(Bloomberg) — China’s central bank vowed to take its share of responsibility to stabilize the macroeconomy and pro-actively introduce monetary policies that are conducive to economic stability.

The People’s Bank of China will step up its support for the real economy and continue to lower funding costs for companies, it said in a statement Monday evening after its 2022 work conference. The bank will use a variety of monetary policy tools to keep liquidity “reasonable and ample” and ensure credit growth is stable, it said. 

In addition, the PBOC reiterated their promise to more effectively satisfy home buyer’s reasonable expectations and foster the growth of the property industry. 

Read more: China’s Central Bank Vows Greater Support for Real Economy

After the bank pledged more support to the real economy by 2022, and promised it would use its policy instruments more actively in this year’s statement, the bank made the announcement. While the PBOC so far has taken a cautious approach to monetary stimuli, expectations are rising that it will be more proactive in 2019 given property market issues and slowing private consumption.

The PBOC granted banks permission to reduce the benchmark lending interest rate by five basis point earlier this month. This was after the PBOC released 1.2 trillion yuan ($188billion) in money. It also reduced the reserve amount banks must keep. Also, it reduced the interest rates for the revolving loan program to small-businesses. The November increase in credit was a welcome surprise after a nearly one-year slowdown.

Targeted support for key areas including small businesses, technology innovation, green transition and rural revitalization will be enhanced, according to Monday’s statement. 

The bank stated that it would also increase supervision over capital companies and online platform companies and will continue to rectify financial sites. The bank maintained its position on the yuan. It stated that the exchange rate for currency will be more flexible while remaining stable and reasonable. 

©2021 Bloomberg L.P.

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