China cen­tral bank seeks to re­as­sure on yuan, growth

The Pak Banker - - FRONT PAGE -

SHANG­HAI: There is no rea­son for China's yuan cur­rency to keep fall­ing and Bei­jing has more room to boost the world's se­cond-largest econ­omy, the gov­er­nor of its cen­tral bank said Fri­day as he sought to re­as­sure mar­kets.

The com­ments by Zhou Xiaochuan, head of the Peo­ple's Bank of China (PBoC), in Shang­hai came ahead of a meet­ing of fi­nance min­is­ters from the world's top 20 economies in the city, China's com­mer­cial hub.

"There is no ba­sis for per­sis­tent ren­minbi de­pre­ci­a­tion from the per­spec­tive of fun­da­men­tals," Zhou said, us­ing an­other name for the cur­rency. "Short-term mar­ket volatil­ity will give way to eco­nomic fun­da­men­tals. The mar­ket is some­times more in­flu­enced by short-term fac­tors." The Chi­nese econ­omy grew 6.9 per­cent last year, the slow­est rate since 1990, and its weak­en­ing has been a driver of slump­ing com­mod­ity prices and one of the fac­tors be­hind global stock mar­ket tur­moil this year.

But Zhou told a con­fer­ence or­gan­ised by the In­sti­tute of In­ter­na­tional Fi­nance: "The fun­da­men­tals of China's econ­omy re­main strong." Bei­jing has taken a se­ries of steps to try to boost growth, with six in­ter­est rate cuts since Novem­ber 2014 and mul­ti­ple re­duc­tions in the amount banks must keep in re­serve, along with tar­geted spend­ing in­creases.

"China still has some mon­e­tary pol­icy space and mon­e­tary pol­icy tools to ad­dress po­ten­tial down­side risk," Zhou said in a pos­si­ble sig­nal of more such moves. Bei­jing "will main­tain pru­dent fi­nan­cial pol­icy in a flex­i­ble and ap­pro­pri­ate way", Zhou added. Many an­a­lysts have been ex­pect­ing Bei­jing to take more mea­sures to boost the econ­omy. "The re­serve re­quire­ment ra­tio is quite high," Liu Li­gang, China chief econ­o­mist at ANZ Re­search, told AFP. "And the in­ter­est rate gap com­pared with other coun­tries is quite big, so the space for mon­e­tary pol­icy steps for China is very very big." The PBoC in­jected 300 bil­lion yuan ($46 bil­lion) into the fi­nan­cial sys­tem on Fri­day as part of its reg­u­lar op­er­a­tions to boost liq­uid­ity. Chi­nese stocks were higher by the break af­ter Zhou's com­ments, with the bench­mark Shang­hai Com­pos­ite In­dex ris­ing 0.43 per­cent, hav­ing plum­meted more than six per­cent on Thurs­day.

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