Senior People’s Bank of China officials pushed back against interpretations of its recent moves as signaling significantly looser policy, emphasizing that monetary policy remains prudent — although it would be more targeted and flexible.
“The stance on prudent monetary policy has not changed, but it will be more appropriate in tightening or loosening, because the situation is complex, and policy reactions should be more forward-looking, flexible and targeted,” Monetary Policy Department director Sun Guofeng (孫國峰) told reporters in Beijing on Friday.
Policymakers would not “flood” the economy with excessive liquidity, Sun said.
China’s top leaders have pledged to keep monetary policy prudent while striking an “appropriate” balance between tightening and loosening next year, dropping the “neutral” description. The new language, coupled with moves to boost private-sector funding, prompted some economists to predict cuts to bank reserve-ratio requirements or benchmark interest rates next year.
Leaders also made no reference to the yuan in the statement after their annual economic policy meeting this month, removing last year’s reference to keeping the exchange rate “basically stable at a reasonable and equilibrium level.”
The omission “doesn’t represent any changes to policies,” Sun said, and the statement could not include all topics, as space was limited.
Officials took note of the discussion among analysts and investors about the dropped clause, and ensured that a separate statement released this week after the monetary policy committee’s quarterly meeting included the language on exchange rates, he said.
Despite earlier easing measures, the world’s second-largest economy still faces challenges of sluggish investment, weak consumption and the trade dispute with the US. The expansion is inevitably slowing as it transitions from a high-growth, export-led model to a greater consumer focus and more moderate growth.
Amid that change, economists surveyed by Bloomberg projected 6.2 percent GDP growth next year, the slowest since 1990.
Growth is still in a reasonable range, but there are “worrying aspects,” said Ruan Jianhong (阮健弘), head of the central bank’s research and statistics department.
The main concerns for policymakers are slower global economic growth, sluggish domestic investment, and the difficulties confronting small and private economies, Ruan said.
Amid such headwinds, policymakers softened a multi-year deleveraging campaign this year.
Still, the bank closely watches risks related to the property market and online financing, said Zou Lan (鄒瀾), deputy head of the bank’s financial markets department.
“We pay close attention to changes in the funding of property developers, who used to have a relatively high leverage ratio, but has come down a little recently,” Zou said, adding that risks to the industry “can be quickly influenced by markets and easily contagious.”
Friday’s comments were made by bank officials in a small group interview with media that was part of the central bank’s efforts to improve its public discussion of policy issues.
“We’ve realized that guiding market expectations requires more transparency,” and the central bank will also step up communication with financial institutions during the policymaking process, central bank spokesman Zhou Xuedong (周學東) said.
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