PBOC ready with prudent policy for global downturn
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.