People’s Bank of China Governor Zhou Xiaochuan (周小川) said yesterday the bank had sufficient room to ease lending curbs to support economic growth, but any changes would be gradual.
The rapid growth of the world’s second-largest economy slowed over the past year as Beijing tightened controls to prevent overheating. Chinese leaders are now responding to a decline in global demand by promising pro-growth policies, and companies and investors are closely watching what steps they will take.
There is scope to lower the level of reserves Chinese banks are required to hold — a move that would free more money to lend to businesses — after the minimum level was raised five times in 2010 and last year, Zhou said. The minimum stands at 20 percent of deposits for China’s biggest lenders.
“We have a lot of room to adjust the reserve ratio. On the other hand, it is necessary to see whether there is a necessity to adjust,” Zhou said at a news conference during the annual meeting of the National People’s Congress.
He gave no indication when regulators might lower reserves.
“We need to take into consideration the different restriction factors and we need to see the advantages and disadvantages of adjustment, especially its impact on financial flows,” Zhou added.
Zhou and other officials said the central bank would closely watch the eurozone debt crisis and other global factors that might hurt the Chinese economy, but they emphasized that on a wide range of issues, policy changes would be gradual and cautious.
“Our monetary policy will have to follow conditions in China and also internationally. We will cope with problems responsibly,” Zhou said.
China’s economic growth eased to 8.9 percent in the final quarter of last year from the previous year’s double-digit expansion. The government’s growth target for this year is 7.5 percent.
The latest trade data show Chinese and global demand weakening.
Figures released on Saturday showed that export growth in the first two months of this year slowed to 6.9 percent, compared with 13.4 in December last year. Analysts often combine the two months to screen out disruption from the Lunar New Year holiday, which falls at different times in that period each year.
Growth in imports for the two months declined to 7.7 percent from 11.8 percent in December.
Also yesterday, central bank officials said Beijing would press ahead with reforms to ease controls on its tightly regulated currency and give market forces a bigger role in setting the yuan’s exchange rate, but they gave no details.
“We will continue with the reform to have an exchange-rate regime that is more market-based,” bank deputy governor in charge of foreign currency Yi Gang (易綱) said.
Yi and other officials did not respond to a question about whether Beijing believed the yuan had reached its fair value after its gradual rise against the US dollar stopped in recent months and China reported an unexpectedly large US$31.5 billion trade deficit for last month.
Yi also expressed confidence in the ability of Europe, China’s biggest trading partner, to solve its debt crisis. He said China would continue to invest in Europe, though he stressed that minimizing risk remained a priority. He gave no indication whether Beijing had decided to contribute to a bailout fund for countries that use the euro.
“We believe European countries will be able to cope with the euro crisis,” Yi said. “We will continue to invest in Europe as a responsible investor.”
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