Chinese Central Bank Commits to No “Flood-style” Irrigation, Continued Support for Real Economy, in Q3 Monetary Policy Report


The People’s Bank of China (PBOC) has highlighted its commitment to restrained monetary policy and its ongoing support for high-quality growth of the real economy in its latest monetary policy report.

In its 2022 Q3 Monetary Policy Execution Report (2022年第三季度中国货币政策执行报告) released on 16 November, PBOC said that it would “make stability the watch weird, pursue progress amidst stability and shore up the implementation of the raft of economic stabilisation policies and subsequent measures.”

PBOC also said that it would “expand the intensity of the implementation of stable monetary policy, and firmly support the stabilisation of the broader economy.”

This will involve “effective performance of cross-cyclical adjustments…firmly refraining from flood-style irrigation, not engaging in excessive monetary issuing and providing more vigorous and high-quality support to the real economy.”

Other upcoming measures highlighted by PBOC include:

  • Guiding policy and development banks to make effective and adequate use of the policy development financial instrument quota and 800 billion yuan new lending quota.
  • Guiding commercial banks to expand medium and long-term lending.
  • Maintaining rational growth in the money supply and total social financing.
  • Extending the depth of marketisation reforms of interest rates.
  • Optimizing the central bank policy rate system.
  • Making use of the key role of deposit rate market-based adjustment mechanisms.
  • Striving to stabilise the liabilities costs of banks.
  • Unleashing the efficiency effects of loan prime rate (LPR) reforms.
  • Driving reductions in the costs of enterprise financing and personal consumer loans.
  • Closely monitoring the spillover effects of the economic trends of major developed economies and their monetary policy adjustments.
  • Making China the focus while also paying attention to internal and external balancing.
  • Upholding market supply and demand as the foundation.
  • Making reference to a basket of currencies in the implementation of a floating exchange rate system which is managed and subject to adjustments.
  • Upholding the decisive role of the market in the formation of exchange rates.
  • Maintaining the fundamental stability of the renminbi exchange rate at a rationally balanced level.
  • Maintaining the overall stability of the financial system.
  • Establishing healthy financial risk prevention, early warning, and disposal mechanisms.
  • Firmly defending the bottom line against the onset of systemic financial risk.

“At present the external environment is becoming more complex and severe, with overseas inflation riding high, and the risk of a global downturn expanding,” said the Report. “The foundations for the recovery of the domestic economy are also not solid.

“However, it must be noted that the factors and conditions for China to create new development conditions remain quite ample, and the trend of recovery in effective demand is continually increasing. Economic resilience is strong, potential is strong, and there is huge room to manoeuvre, while there is no change in long-term positive fundamentals.

“We must maintain strategic focus, and firmly and effectively see to our own affairs.”