Chinese Central Bank Commits to Contained Monetary Policy amidst Economic Stabilisation Measures

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The People’s Bank of China (PBOC) has reiterated its commitment to moderate monetary policy, amidst the launch of a raft of measures by the Chinese central government to stabilise the national economy.

PBOC deputy governor Liu Guoqiang (刘国强) said that in future PBOC will “effectively implement stable monetary policy…and refrain from flood-style immigration or drawing overdrafts on the future.”

Liu made the remarks on 5 September at a routine press conference held by China’s State Council.

According to Liu, China’s early recovery from the Covid pandemic enabled it to avoid “excessive issuance of money and the implementation of abnormal monetary policy.”

“For this reason, China at present has ample monetary policy room, and its policy tools are diverse.”

With regard to the renminbi exchange rate, Liu said that the spillover impacts of US monetary policy are “controllable.”

“Against a background of US dollar appreciation, the renminbi has depreciated around 8%, but compared to other non-US dollar currencies, its scope of depreciation is the smallest,” Liu said.

“The renminbi has appreciated against non-dollar currencies, and has not seen comprehensive depreciation.”

“The long-term trend of the renminbi is clear,” Liu said. “In future, endorsement of the renminbi will continually strengthen. However, short-term fluctuations are still normal.”

The statements from PBOC arrive as other top economic authorities, including the National Development and Reform Commission (NDRC), the Ministry of Finance (MOF) and the Ministry of Commerce (MOFCOM) step up the implementation of the “raft” of economic stabilisation policies previously outlined in May and August.

These stabilisation measures will include the use of more than 500 billion yuan in spare local government special bond quotas, and another 300 billion yuan in policy development fiscal instruments.