China’s central bank will implement further monetary policy actions to stabilize the economy and stay ahead of the market curve as downward pressures persist, the bank’s deputy governor Liu Guoqiang said after the latest interest rate cut.
The world’s second-largest economy, which cooled off over the past year, faces multiple headwinds in 2022, including continued weakness in the real estate sector and the local spread of the omicron variant of the coronavirus.
“Before (market) fundamentals ease downward pressure on the economy, we need to use more monetary policy tools that are conducive to stability“, He said Liu at a press conference.
“We must hurry up, make our operations look forward, stay ahead of the market curve, and respond to general market concerns in a timely manner.”.
Liu stated that the central bank would expand the use of its monetary policy tools to avoid a “collapse” of credit.
On Monday, the People’s Bank of China (PBOC) unexpectedly cut medium-term borrowing costs for the first time since April 2020.
Liu He said there was still room for the central bank to cut reserve requirements (RRR), although the scope of such measures is being dissipated by last year’s series of cuts to lenders’ reserve requirements.
The average RRR for financial institutions – the proportion of their deposits that they must hold as reserves and not deliver on credit – is 8.4%, he said.
China’s macro leverage ratio fell 7.7 percentage points in 2021 to 272.5%, Liu said, adding that lower debt levels would create more room for further easing of monetary policy.
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