State Council Signals Stable Monetary Policy, No “Flood-style Irrigation”


China’s State Council has signalled the maintenance of stable monetary policy settings at its latest regular meeting.

The meeting of the State Council convened by Premier Li Keqiang on 21 March said that “maintaining development is the number one mission,” while also stressing the need to “uphold stability as the watchword, pursue progress amidst stability, deepen reform and opening, maintain economic activity within a rational range, and preserve the stable and healthy development of capital markets.”

With regard to monetary policy, the meeting called for “expanding the vigour of support for the real economy by stable monetary policy; firmly refraining from ‘flood-style irrigation’, and using monetary policy tools to maintain moderate growth in total social financing.”

Wen Bin (温彬), chief researcher with China Minsheng Bank, said to state-owned media that the Chinese central bank can be expected to make effective use of the quantitative and structural facets of monetary policy tools to address insufficient total demand, as well as spur market confidence via cuts to the reserve ratio and interest rates.

Wen also foresees continued use of structured monetary policy tools including micro-loans to support rural and small businesses; tools to support carbon emissions reductions, as well as specialist reloans for clean energy and energy efficiency, which will provide focused support to the manufacturing sector, micro-and-small enterprises, tech innovation, green development and rural village revitalisation.