What’s new: There is still room for China to cut the reserve requirement ratio (RRR) for banks — the amount of cash banks are required to hold in reserves, said Pan Gongsheng, governor of the People’s Bank of China, signaling potential for further policy easing.
“China’s monetary policy toolbox remains sufficient, and there is still ample room for monetary policy,” said Pan at a Wednesday press conference on the sidelines of this year’s annual legislative meetings.
The dollar’s weakening momentum will allow China to loosen its monetary policy without causing more capital flight, Pan added.
The central bank will make comprehensive use of various monetary policy tools, intensify countercyclical adjustments and prioritize maintaining price stability and promoting a moderate price rebound as key considerations of monetary policy, said Pan.
Pan reiterated that the central bank would keep the yuan stable and indicated that the bank will set up relending programs for tech innovation and upgrading,
The context: China’s policymakers are facing challenges to prop up the world’s second largest economy and turn around a persistent property slump.
Regulators have taken intensive measures to stimulate the economy, including a cut of the reserve requirement ratio for banks and reduction of its key mortgage reference rate. The measures are expected to encourage lending and improve the sentiment of the housing market.
But analysts said the current measures are still insufficient to boost the economy.
China has set its target for GDP growth this year at around 5%, Premier Li Qiang said Tuesday, acknowledging it would not be an easy goal to meet amid challenges that include a lack of effective demand, overcapacity in some industries and a complex and severe external environment.
Contact reporter Han Wei (weihan@caixin.com)
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