China’s cen­tral bank to fine tune pol­icy, keep yuan sta­ble

The Pak Banker - - COMPANIES/BOSS -

China's cen­tral bank will "fine tune pol­icy in a timely man­ner" and "flex­i­bly use var­i­ous pol­icy tools ... to help main­tain ap­pro­pri­ate liq­uid­ity and rea­son­able growth in credit and so­cial fi­nanc­ing," says Peo­ple's Bank of China.

China's cen­tral bank will "fine tune pol­icy in a timely man­ner" and "flex­i­bly use var­i­ous pol­icy tools ... to help main­tain ap­pro­pri­ate liq­uid­ity and rea­son­able growth in credit and so­cial fi­nanc­ing," says Peo­ple's Bank of China. China will fine tune mon­e­tary pol­icy and keep the yuan ba­si­cally sta­ble while guard­ing against sys­temic fi­nan­cial risks, the coun­try's cen­tral bank said in its fourth-quar­ter mon­e­tary pol­icy re­port. China will also main­tain an ap­pro­pri­ate level of liq­uid­ity and achieve rea­son­able growth of money and credit, the Peo­ple's Bank of China (PBOC) said in the re­port. The re­port comes af­ter China re­ported eco­nomic growth of 6.9 per cent for 2015, its weak­est in 25 years, while de­pre­ci­a­tion pres­sure on the yuan adds to the case for the cen­tral bank to take more eco­nomic stim­u­lus mea­sures over the near-term. In the re­port, the bank said it will "fine tune pol­icy in a timely man­ner" and "flex­i­bly use var­i­ous pol­icy tools ... to help main­tain ap­pro­pri­ate liq­uid­ity and rea­son­able growth in credit and so­cial fi­nanc­ing."

It also said it would seek to ex­plore mecha- nisms to en­hance man­age­ment of in­ter­est rates, while in­creas­ing the flex­i­bil­ity in both di­rec­tions of the yuan ex­change rate.

It will im­prove the yuan regime and "let the mar­ket play a big­ger role in set­ting the ex­change rate, in­creas­ing two-way flex­i­bil­ity of the ren­minbi ex­change rate, keep­ing the yuan ba­si­cally sta­ble at a rea­son­able and bal­anced level." The PBOC said it would ex­pand chan­nels for yuan in­flows and out­flows and at the same time im­prove the pru­den­tial man­age­ment of cross­bor­der cap­i­tal flows." Liq­uid­ity of­ten tight­ens ahead of China's Lu­nar New Year hol­i­days, which be­gin on Mon­day.

In the past month, the bank has re­peat­edly in­jected money into the bank­ing sys­tem via short- and medium-term lend­ing tools and in­creased the fre­quency of its open mar­ket op­er­a­tions. The PBOC also said in the re­port that it would im­prove man­age­ment of risks cre­ated by lo­cal govern­ment debt. A slew of eco­nomic in­di­ca­tors has sent mixed sig­nals to mar­kets at the start of 2016 over the health of China's econ­omy. Ac­tiv­ity in the ser­vices sec­tor ex­panded at its fastest pace in six months in Jan­uary, a pri­vate sur­vey showed on Fe­bru­ary 3, while man­u­fac­tur­ing ac­tiv­ity fell to the low­est since Au­gust 2012. The cen­tral bank also said it aimed to "cre­ate a neu­tral and ap­pro­pri­ate mon­e­tary and fi­nan­cial en­vi­ron­ment" for struc­tural re­form.

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