PBOC Governor Says China Still Has Ample Tools to Deal with Sino-US Trade War

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The head of China’s central bank says that it still has a range of tools at its disposal to deal with the fall out of ongoing trade tensions with the United States.

People’s Bank of China (PBOC) governor Yi Gang expressed concern about the potential impacts of Sino-US trade tensions on Sunday, while speaking at the International Banking Seminar, held at the sidelines of annual meetings of the International Monetary Fund and the World Bank in Bali, Indonesia.

“I think the downside risks from trade tensions are significant,” said Yi according to a report from CNBC.

The IMF estimates that US tariffs could reduce China’s economic growth by 1.6 percentage points over two years, and has cut its forecast for 2019 growth by 0.2 percentage points to 6.2%, while still maintaining its 2018 growth forecast at 6.6%

While Yi said he believes the IMF’s latest round assessments to be reasonable, he also took pains to highlight the policy tools that Beijing retains at its disposal.

“We still have plenty of monetary instruments in terms of interest rate policy, in terms of required reserve ratio,” said Yi. “We have plenty of room for adjustment, in case we need it.”

PBOC recently unveiled a fourth targeted cut to the required reserve ratio for Chinese banks, which is set to come into effect on 15 October.

Yi nonetheless reiterated the Chinese central bank’s commitment to prudent and neutral monetary policy over the weekend, highlighting a significant slowdown in the growth of the M2 money supply to single digits in 2018, as well as interest rate levels and broader monetary conditions.

Yi also pointed out that total social financing -a broad measure of credit extension to the private sector, remains within a “reasonable range.”

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