China cbank warns of economic weakness due to reforms
China's economy may face headwinds in coming months due to its reform efforts, the central bank said on Friday and it warned that monetary policy was being blunted by a lack of new growth drivers and lukewarm appetite for new investment.
Yet despite the pain of reforms, the People's Bank of China said the world's second-largest economy should not be powered by strong stimulus in the medium term, and must instead depend on a retooled growth engine to drive activity.
In its second-quarter monetary policy report, the central bank also cautioned that more financial innovation in China was heightening risks by increasing volatility in asset prices and raising debt levels.
"The economy is still relatively reliant on policies intended to stabilize growth and on governmentled investment," the central bank said in the 64-page report. It reiterated its stance by saying that policy would be kept prudent, though there would be a focus on keeping it "appropriate" and neither too tight nor too loose.