China’s CB pledges to step up support for slowing economy
China’s central bank said on Monday it would step up support for the slowing economy, while closely watching domestic inflation and monitoring policy adjustments by developed economies.
The People’s Bank of China (PBOC) will keep liquidity reasonably ample, prioritise stability and take steps to boost confidence, the bank said in its first-quarter monetary policy implementation report.
“Recently, the COVID-19 and the Ukraine crisis have led to increased risks and challenges, and the complexity, severity and uncertainty of China’s economic development environment have increased,” the central bank said.
But China still has favourable conditions to develop its economy over the long term thanks to its big market potentials and ample room for manoeuvre, it said.
China will keep its economic operations within reasonable ranges, the central bank said, adding it would not resort to flood-like stimulus.
The central bank will support housing demand and step up support for housing leases, it said, reiterating it would not use property as short-term stimulus for the economy.
China will keep its macro leverage ratio basically stable and also keep the yuan exchange rate essentially stable, the central bank.
The economy has taken a hit from efforts to contain the spread of record COVID-19 cases, which have led to a full or partial lockdown in dozens of Chinese cities, led by a city-wide shutdown in the economic and financial hub of Shanghai.
The PBOC cut the amount of cash that banks must hold as reserves last month and more modest easing steps are expected.
China will take steps to support its economy as risks grow from its COVID-19 outbreaks and conflict in Ukraine, a top decision-making body of the ruling Communist Party said last month.
Meanwhile the China’s new yuan loans are expected to have dropped in April ater a rebound in March as credit demand weakened, a Reuters poll showed, even as the central bank keeps policy accommodative to support the slowing economy.
The Chinese economy has taken a hit as authorities raced to stop the spread of record COVID-19 cases, which have led to a full or partial lockdown in dozens of Chinese cities, including a city-wide shutdown in the commercial hub of Shanghai in April.
Chinese banks are estimated to have issued 1.52 trillion yuan ($226.32 billion) in net new yuan loans last month, half of the 3.13 trillion yuan in March, according to the median estimate in the survey of 18 economists.
But the expected new loans would be higher than 1.47 trillion yuan issued in the same month a year earlier.
Analysts believe the expected fall in new loans in April was due to weaker demand for credit from businesses and seasonable factors as Chinese banks rushed to extend more loans towards the end of the first quarter.
“Despite policy-easing efforts, credit demand likely deteriorated further in the month as production was suspended in a large part of the economy,” analysts at Goldman Sachs said in a note.
To cushion a sharp slowdown in economic growth, the central bank cut the amount of cash that banks must hold as reserves from April 25, and more modest easing steps are expected.
China will take steps to support its economy, including embatled internet plaforms, as risks grow from its COVID-19 outbreaks and conflict in Ukraine, a top decision-making body of the ruling Communist Party said last month.
China has pledged to keep money supply and total social financing growth basically in line with nominal economic growth this year.
Outstanding yuan loans were expected to grow by 11.4 per cent in April from a year earlier, the same as in March, the poll showed. Broad M2 money supply growth in April was seen at 9.9 per cent, up from 9.7 per cent in March.
China has set the 2022 quota for local government special bond issuance at 3.65 trillion yuan, unchanged from last year.
Any acceleration in government bond issuance could help boost total social financing (TSF), a broad measure of credit and liquidity.
Goldman Sachs expects year-on-year growth of outstanding TSF to quicken to 10.8 per cent in April form 10.6 per cent in March.
In April, TSF is expected to fall to 2.15 trillion yuan from 4.65 trillion yuan in March.
China’s banking and insurance regulator recently asked banks and insurers to develop pension financial services and invest the funds in areas in line with national strategies and industrial policies, the official Shanghai Securities News reported on Monday.
The move comes as China launched its first private pension scheme last month, as it tackles economic challenges linked to an ageing population and looks to channel more long-term money into the stock market.
The People’s Bank of China will keep liquidity reasonably ample, prioritise stability and take steps to boost confidence, the bank said in its first-quarter monetary policy implementation report