PBOC ready with pru­dent pol­icy for global down­turn

Muscat Daily - - BUSINESS -

Bei­jing, China - China’s mon­e­tary pol­icy should re­main pru­dent with room for ad­just­ment as a pro­longed down­turn in the global econ­omy is likely, cen­tral bank gov­er­nor Yi Gang said.

The People’s Bank of China (PBOC) should be pre­pared for a ‘mid- and long-dis­tance race’ and stick to con­ven­tional pol­icy as long as pos­si­ble, Yi wrote in an ar­ti­cle pub­lished on Sun­day on the WeChat ac­count of Qiushi, the Com­mu­nist Party’s flag­ship magazine.

“The world’s eco­nomic down­turn will likely stay for a long time,” he wrote. “We should stay fo­cused and tar­geted, while not com­pet­i­tively low­er­ing in­ter­est rates to zero or en­gag­ing in quan­ti­ta­tive eas­ing.”

Eco­nomic devel­op­ment ‘should not be sim­ply judged by gross do­mes­tic prod­uct growth’, Yi said, adding that the mis­sion of mon­e­tary pol­icy is to keep prices sta­ble and pro­tect people’s money from in­fla­tion. He also re­peated a pledge to keep the yuan flex­i­ble and not en­gage in com­pet­i­tive de­pre­ci­a­tion.

Yi’s com­ments come ahead of a high level eco­nomic meet­ing ex­pected this month where top lead­ers and se­nior officials will lay out growth tar­gets for 2020. Econ­o­mists an­tic­i­pate the econ­omy could slip to sub-6 per cent growth, a sit­u­a­tion Bei­jing may be com­fort­able with as long as em­ploy­ment and risk are in check.

China’s cen­tral bank has main­tained a fairly neu­tral pol­icy stance com­pared to its global peers, trim­ming in­ter­est rates for com­mer­cial lenders only moder­ately. The PBOC has voiced con­cerns on surg­ing con­sumer in­fla­tion, which an­a­lysts ex­pect to peak at 5 per cent or 6 per cent in early 2020.

In Sun­day’s ar­ti­cle, Yi ex­ten­sively re­viewed the history of global mon­e­tary pol­icy since the Great De­pres­sion. He said overly loose pol­icy can harm long-term devel­op­ment, be­cause it de­lays nec­es­sary re­forms and fu­els bub­bles.


Yi Gang

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