China Pledges Stronger Monetary Policies to Handle Growth Hit

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The People’s Bank of China said the country faces unprecedented economic challenges from the coronavirus pandemic and it will resort to “more powerful” policies to counter the hit to growth.

Policy makers will pay more attention to economic growth and jobs among multiple targets, the central bank said in its quarterly monetary policy implementation report, released Sunday. It reiterated that prudent monetary policy will be more flexible and appropriate, and that it will maintain liquidity at a reasonably ample level.

The phrase “will avoid excess liquidity flooding the economy” was missing from the policy outlook section. It was in the previous report for the fourth quarter of 2019.

26,906 in U.S.Most new cases today

-14% Change in MSCI World Index of global stocks since Wuhan lockdown, Jan. 23

-1.​049 Change in U.S. treasury bond yield since Wuhan lockdown, Jan. 23

-4.​8% Global GDP Tracker (annualized), April


Read more: $250 Billion Cash Hole" class="terminal-news-story" target="_blank">China Seen Adding Funds in May to Plug $250 Billion Cash Hole

Other highlights from the report:

  • Will advance interest-rate reform with regards to the loan prime rate and guide the lending rate lower.
  • The policy outlook section deleted the usual description of what tools the bank plans to use to direct bank loans to the real economy. Previously it explicitly stated that it would use cuts to required reserve ratios and also to targeted RRR.
  • PBOC will keep China as one of the few major economies that’s implementing “normal” monetary policy.
  • Will bring re-lending and re-discounting policies into full use and expand credit support to virus-hit sectors such as agriculture and trade.
  • Will maintain basically stable prices as China’s economic fundamentals suggest there’s no reason for long-term inflation or deflation.
  • Will push banks to replenish capital through channels including perpetual bonds.
  • Will contain financial risks, make sure it’s generally controlled.
  • Global economy has slipped into “recession track” in short term and the impact of the virus may exceed expectations; the international outlook for controlling the outbreak remains unclear and global policy room is limited.
  • Attention needed to the spillover effects of monetary easing in other major economies, including on China’s balance of payments.
  • According to the report, the interest rate for the Standing Lending Facility was cut by 30 basis points on April 10. Bloomberg reported last month that the rate would likely be lowered.

— With assistance by Charlie Zhu, Emma Dong, and Yinan Zhao

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