Structured Monetary Policy Tools Critical to Supporting China’s Post-Covid Economy: Former PBOC Official


A former central bank official has highlighted the critical role of the People’s Bank of China’s (PBOC) structured monetary tools in helping to keep the country’s economy afloat amidst the adverse impacts of the Covid pandemic.

Sheng Songcheng (盛松成), professor at the China Europe International Business School (CEIBS) and formerly the head of PBOC’s statistics department, said that PBOC had made extensive use of structured monetary policy tools to deal with the supply-side impacts of the Covid pandemic.

“On the foundation of not engaging in flood-style irrigation, China has mainly dealt with shock of the pandemic on the supply-side, which means supporting the stability and development of the real economy,” Sheng said at the CLF50 platform held by CEIBS in Shanghai’s Lujiazui district.

“Structured monetary policy has played a unique role in this regard.

“The Chinese central bank commenced exploration and usage of the adjustment role of structured monetary tools at quite early an stage…structured monetary policy simultaneously plays the dual roles of adjusting structure and quantity.

“They both adjust structure, and at the same time are a base money supply channel.

“Additionally, China’s structured monetary policy is transmitted from the central bank to commercial banks, then to all parts of the real economy, playing a combined role.”

In its “Introduction to Structured Monetary Policy Tools” (结构性货币政策工具介绍) PBOC defines the instruments as “tools that PBOC uses to guide the extension of loans and investment by financial enterprises and play the role of targeted irrigation and expansion of leverage.”

“By means of providing re-loans or funds incentivisation methods, they support financial institutions in expanding the provision of loans to designated areas and sectors, and reduce enterprise financing costs.”

Sheng pointed in particular to the increased use of re-loans, including special transport and logistics re-loans and collateralised supplementary loans, as well as carbons emissions reductions support tools and 200 billion yuan in special loans to ensure the delivery of property projects.

Speaking to state-owned media, Sheng said that real estate risk is currently the most important risk for the Chinese economy, and that loosening financing constraints for the property sector would help it to achieve a “soft landing.”