Central bank to ramp up support for real economy

▶ PBC has array of monetary tools to tackle difficulties

Amid the headwinds of multiple domestic Omicron flare- ups and global volatility, Chinese economic officials have pledged new monetary tools to help companies weather the current difficulties and strive for swift resumption of operations, as China aims for stable economic and social development, while fighting the highly transmissible Omicron variant.

China’s central bank will readjust its monetary policy to expand support for the real economy to stabilize market entities, prices, employment and public expectations, in order to achieve the nation’s annual economic development goals and keep the economy running within a reasonable range, Chen Yulu, deputy governor of the People’s Bank of China ( PBC), said in an interview with the Xinhua News Agency on Saturday.

The PBC plans a re- lending facility equivalent to 100 billion yuan ($ 15 billion) for the logistics and warehousing sectors, which have been hit hard by the outbreaks, and it will also support banks’ expansion of credit supply and encourage financial institutions to cut service fees, Chen said.

To help alleviate difficulties faced by companies in pandemic- hit Shanghai, Yu Wenjian, director of the financial consumer protection bureau of the PBC, said that the PBC Shanghai Head Office has announced 20 financial measures to help companies resume work and production.

He said that the Head Office will encourage financial institutions to connect with companies on Shanghai’s “whitelist” of firms allowed to resume work to expand lending by making use of long- term funds released by the reserve requirement ratio ( RRR) cut.

More credit will be provided to companies operating in segments hit hard by the epidemic like tourism, restaurants, retail, transportation, logistics, entertainment and exhibitions, Yu said, stressing the intensity of inclusive loans for small and micro- sized enterprises.

Although achieving dynamic zeroCOVID affects some economic activities in the short term, the PBC has a wide array of aggregate and structural monetary tools at its disposal to shore up the real economy for the rest of the year, said Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology.

The central bank recently announced the creation of a one- year technology innovation re- lending facility totaling 200 billion yuan, a 40- billion- yuan re- lending quota for inclusive elder care, and an additional 100 billion yuan special re- lending facility for the clean use of coal.

In addition, the central bank has turned over more than 1 trillion yuan in surplus profits to the country’s central budget this year, which is expected to propel the growth of M2 by 0.5 percentage points, Chen said.

The PBC’s recent move to cut the RRR by 0.25 percentage points in April, following an RRR cut in December of 0.5 percentage points, will increase long- term capital supply for domestic financial institutions.