Central Bank Releases Q4 Monetary Policy Implementation Report


The People’s Bank of China released its 2017 Q4 China Monetary Policy Implementation Report (2017年第四季度中国货币政策执行报告) on 14 February, 2018, just prior to the start of the Lunar New Year.

According to the report, as the Chinese economy make the transition from a high-speed development phase to a high-quality development phase, the country’s monetary policy “needs to achieve a better balance between stable growth, structural adjustments, expediting reform, deleveraging and risk prevention.

“Overall, stable and neutral monetary policy has achieved quite good results, effectively containing leverage in the financial system while maintaining stable and rapid growth of the economy.

“Banking sector liquidity is neutral, the monetary credit and the social financing scale have grown steadily, interest rates are at appropriate levels overall, and the flexibility of the renminbi-US dollar exchange rate has further increased.

“As of the end of 2017, the renminbi loan balance saw YoY growth of 12.7%, for an increase of 13.5 trillion yuan compared to the start of the year, and a year-on-year acceleration of 878.2 billion yuan.

“The total social financing stock posted a year-on-year increase of 12%, while the December non-fianncial enterprise and other sector loan weighed average interest rate was 5.74%.

“As of the end of 2017, the CFET Renminbi exchange index was 94.85, for a full year rise of 0.02%, while the RMB-USD central parity rate was 6.5342, for a rise of 6.16% since the start of the year.

“The end of year M2 broad money supply balance saw a year-on-year increase of 8.2%, primarily signifying the results of restriction of endogenous leverage within the financial system.

“Looking forward to 2018, global economic growth prospects are expected to continue to improve, and China’s development potential is immense.

“However we must also note that there are numerous unstable and uncertain factors internationally, and while there have been positive changes in structural adjustments to the domestic economy and the financial sector, structural contradictions continue to remain pronounced, and the prevention and resolution of major risk remains a formidable mission.

“In the next stage, the People’s Bank of China will engage in innovation of financial control mentalities and methods, maintain the continuity and stability of policy, properly implement stable and neutral monetary policy, maintain rational and stable liquidity and control the sluice gate of the money supply, with a firm focus on the three missions of servicing the real economy, preventing financial risk and deepening financial reform, in order to produce a neutral and appropriate monetary and financial environment for supply-side structural reforms and high-quality growth.

PBOC also said that it would “improve the twin-pillar control framework of monetary policy and macro-prudential policy, deepen interest rate and exchange rate market reforms, strengthen interest rate adjustment capability, expand the strength of the market in determining interest rates, and maintain the fundamental stability of the RMB exchange rate at a rational and balanced level.

“[PBOC] will advance financial reform and liberalisation, vigorously expand financial inclusion, effectively prosecute the war for the prevention and resolution of major financial risk, strengthen coordination between financial regulators, and guard the baseline against the onset of systemic financial risk.”