Cen­tral bank to rein in risky State busi­nesses

China Daily - - FRONT PAGE - By CHEN JIA chen­jia@chi­nadaily.com.cn

China’s mon­e­tary au­thor­ity set up its mul­ti­task­ing goals this year to bet­ter bal­ance eco­nomic growth, fi­nan­cial delever­ag­ing and risk pre­ven­tion while main­tain­ing a tough reg­u­la­tory stance.

Peo­ple’s Bank of China, the cen­tral bank, kept the 2018 mon­e­tary pol­icy tone as “pru­dent and neu­tral” in its mon­e­tary pol­icy re­port re­leased on Wed­nes­day, pledg­ing to con­trol the to­tal money sup­ply and main­tain rea­son­able credit growth while keep­ing its eye on the liq­uid­ity sit­u­a­tion.

With the lever­ag­ing level high and the debt bur­den even higher for State-owned en­ter­prises, the key task is to fur­ther en­hance reg­u­la­tions on shadow bank­ing ac­tiv­i­ties and real es­tate fi­nanc­ing, the cen­tral bank said, adding it also must reg­u­late lo­cal govern­ments’ credit risks.

Con­sid­er­ing China’s cur­rent eco­nomic sit­u­a­tion, “an eas­ing mon­e­tary pol­icy may lead to as­set bub­bles, fi­nan­cial fragility and po­lar­iza­tion be­tween the rich and the poor, while a slower growth of money sup­ply could still sup­port high-qual­ity de­vel­op­ment of the real econ­omy”, it said.

The cen­tral bank plans to in­clude in­ter­bank fi­nanc­ing us­ing ne­go­tiable cer­tifi­cates of de­posit and green fi­nanc­ing in the en­hanced reg­u­la­tory frame­work this year.

The cen­tral bank also will mon­i­tor a po­ten­tial global in­fla­tion re­bound and the with­drawal of ma­jor economies’ quan­ti­ta­tive eas­ing poli­cies.

Liu Li­gang, chief China econ­o­mist with Cit­i­group, said reg­u­la­tory over­hauls and the so-called macro pru­den­tial as­sess­ment im­ple­men­ta­tion will keep China’s mon­e­tary pol­icy rel­a­tively tight in 2018, but the room for tighter mon­e­tary pol­icy will be lim­ited.

“The PBOC may del­i­cately man­age in­ter­bank liq­uid­ity to avoid spikes in in­ter­bank rates against a back­drop of tighter liq­uid­ity con­di­tions due to fi­nan­cial delever­ag­ing and ex­pected rate hikes by the US Fed­eral Re­serve,” said Zhao Yang, chief econ­o­mist in China with No­mura Se­cu­ri­ties.

The coun­try’s yuan-de­nom­i­nated new loans surged to a record 2.9 tril­lion yuan ($460 bil­lion) in Jan­uary, climb­ing five­fold from 584.4 bil­lion yuan in De­cem­ber, ac­cord­ing to the cen­tral bank’s data re­leased on Mon­day.

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