PBoC will continue with ‘prudent and neutral’ monetary policy

BEIJING: China will pursue “neither loose nor tight” monetary policy to ensure basically stable liquidity, said People’s Bank of China (PBoC) deputy governor Chen Yulu.

The central bank would continue to implement “prudent and neutral” monetary policy, and create a “neutral and moderate” financial environment for supplyside reform, Chen told the Tsinghua PBCSF Global Finance Forum, here, on Saturday.

Intensified measures by policymakers to cut financial leverage have spurred concerns over excessive tightening.

The PBoC started to boost the cost of its money-market loans in the third quarter of last year, after the previous loosening cycle pushed benchmark interest rates to record lows.

Combined with a slew of tougher supervisory measures introduced by bank, insurance and security regulators, the PBoC’s tightening has made an impact.

The seven-day repurchase rate, a benchmark for interbank liquidity, averaged 2.93 per cent last month, the highest since March 2015, according to the National Interbank Funding Centre.

Chinese leadership has been vocal about fending off financial risk this year.

Chen said the central bank would beef up support to highend manufacturing and the “weak links” in the economy, while boosting direct financing and cutting funding costs.

The PBoC continues to make injections by giving more loans via its Medium-term Lending Facility. The targeted and longerterm loans aims to offer liquidity support to the real economy. Bloomberg