Chinese Central Bank Will Strengthen Counter-cyclical Monetary Policy Adjustments, Keep Liquidity “Rationally Ample”


The People’s Bank of China (PBOC) has flagged stronger counter-cynical measures in its latest quarterly report on the state of Chinese monetary policy.

On 10 May PBOC issued the 2020 Q1 China Monetary Policy Execution Report (2020年第一季度中国货币政策执行报告), highlighting the unprecedented shock of the COVID-19 pandemic on China’s economic and social development.

According to the report the impacts of the novel coronavirus remain “overall controllable,” and will not change China’s steady, long-term trend towards improvement.

The report said that stable monetary policy must become more flexible, and that policy vigour, key points and pacing must be effectively grasped in accordance with the phase-based changes of disease prevention as well as economic conditions.

PBOC said that it would “strengthen counter-cynical adjustments to monetary policy, place supporting the restoration of the real economy to growth in an even more prominent position; use qualitative and structural policy, maintain rationally ample liquidity, and support the real economy- and micro, small and medium-sized enterprises in particular in overcoming major impasses.

Key policy measures highlighted by PBOC included

  1. More flexibility with regard to stable monetary policy, strengthening of counter-cynical measures, maintaining rationally ample liquidity;
  2. Making full use of the guidance role of re-lending and re-discount policies, and providing targeted financial services for disease control and recovery of the real economy;
  3. Employing the role monetary and loan policy in expediting structural adjustments to the economy and better servicing the real economy;
  4. Further deepening interest rate market reforms and renminbi exchange rate formation mechanism reforms; raising the efficiency of financial resource allocation, ongoing deepening of loan prime rate reforms;
  5. Improvement to the financial market system, effectively employing the role of financial markets when it comes to stable growth, structural adjustment, expediting reform and prevention of risk;
  6. Deepening of supply-side structural reforms, creation of a modern financial system which is highly adaptable, competitive and inclusive;
  7. Continue to effectively wage the war for the effective prevention and dissolution of major financial risk. Ensure that risk is controllable overall, and firmly defend the baseline against the onset of systemic financial risk.

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