China to make monetary policy flexible, targeted and appropriate
BEIJING: China will make its monetary policy flexible, targeted and appropriate, while keeping interbank liquidity reasonable, the central bank said on monday, as authorities seek to consolidate a POST-COVID-19 economic recovery.
China’s economy has staged a strong rebound from the impact of the COVID-19 pandemic, with Chinese exporters racing ahead to fill global demand bolstering the vast industry sector, but the recovery in the consumer end has been weak.
The People’s Bank of China (PBOC), in a statement on its website ater a quarterly meeting of the monetary policy commitee was concluded, flagged a still-complicated internal and external environment facing the Chinese economy.
It would step up forecasts and analyses of both the domestic and global economy, seek greater international economic policy coordination and fend off external shocks to support growth.
A recent move to reform the way banks calculate deposit rates and continued efforts to unleash potential from previous loan prime rate reforms will help drive a further decline in real lending rates, the PBOC said.
Authorities will make use of relending, rediscounting and other monetary tools that would directly help the real economy, said the PBOC.
China will increase flexibility of the yuan exchange rate, PBOC reiterated, although that the currency would be kept stable within a reasonable and balanced range.
Meanwhile the Chinese factory activity likely expanded at a slower pace in June, hit by a resurgence of COVID-19 cases in the major export province of Guangdong, a Reuters poll showed on Monday, though quick containment indicates economic disruption is easing.
Theofficialmanufacturingpurchasingmanager’s Index (PMI) is likely to ease to 50.8 in June from 51 in May, showed the median forecast of 32 economists polled by Reuters. A reading above 50 indicates expansion in activity on a monthly basis.
“The key drag would be COVID disruption on Shenzhen ports, accounting for about 7 per cent of national exports, which has led to slower container throughput growth ,” said analyst sat morgan stanley in a note to clients.
“This could weigh down national exports by 3-4 percentage points, and thus drag the pace of production in mid- to downstream sectors. Meanwhile, construction activity likely slowed amid higher raw material prices.”
More than 150 novel corona virus cases have been reported in Guangdong province, a manufacturing and exporting hub in southern China, since the latest wave of cases struck in late May, prompting local governments to step up prevention and control efforts that have curbed port processing capacity.
But port congestion is easing, with Shenzhen’s Yantian Port, which had been hit by a COVID-19 outbreak, resuming full capacity on Saturday, state media reported. Guangdong has not reported any COVID-19 cases in six days.
Chinese exporters, which have defied expectations of a slowdown since the beginning of the pandemic, are grappling with a global shortage of semiconductors, high raw material costs and sky-rocketing shipping fees as a surge in global demand for Chinese goods stretches global shipping capacity.