Monetary policy should boost real economy
Preventing financial risks remains a top priority: economists
China should pay more attention to the “transmission” of monetary policy and its support for the real economy, according to a national economic meeting held on Friday.
Presided over by Vice Premier Liu He, the meeting of the State Council Financial Stability and Development Commission focused on the current financial situation in China, saying it is improving overall with the macro leverage ratio stabilizing, according to a statement posted on the website of Chinese central government on Friday.
“Market expectations have changed, financial institutions are more aware of compliance, and steps have been made to contain rapid expansion and illegal fundraising activities in the financial sector,” read the statement.
Meanwhile, China’s economy is undergoing a transformation from old economic drivers to new drivers, and long-term accumulated financial risks have entered a frequent and easy-to-occur period, it noted. External uncertainties have also increased.
Lian Ping, chief economist at the Bank of Communications, told the Global Times Friday that preventing financial risks is the top priority.
China’s monetary policy is also being pressured by interest rate hikes in the US and the ongoing trade war between the two countries, Lian noted.
“Faced with the high costs of funding, a transmission mechanism of the monetary policy must be developed to serve the real economy,” said the Friday statement.
On July 23, a government meeting agreed that a more proactive fiscal policy would be pursued.
The country’s prudent monetary policy will be neither too tight nor too loose. The government will keep social financing at a reasonable level, and liquidity will remain proper and sufficient, according to the meeting.
Greater efforts should be made to check credit and strengthen the internal motives of financial institutions’ serving the real economy, in particular, small and micro enterprises, read the statement.
At present, there are still some bottlenecks blocking sufficient funds from being funneled into the real economy, said Lian.
Credit loans can be properly accelerated while the bond market should operate more steadily with fairly adjusted policies, suggested Lian, adding that the development of the currently fluctuating stock market should also be promoted.
Li Daxiao, chief economist at Shenzhen-based Yingda Securities, told the Global Times Friday that small and micro enterprises need policy encouragement to tackle their current financing issues.
“These enterprises are the major force in absorbing and stabilizing the country’s employment,” Li noted.
The People’s Bank of China, the country’s central bank, announced in late June the third reserve requirement ratio cut this year, which is aimed at boosting funding for small and micro firms and supporting debt-to-equity swap programs.