Xinhua, Beijing :
As China’s central bank has shifted to a prudent and neutral monetary policy, it will likely be more careful in balancing its multiple goals.
On the one hand, the People’s Bank of China (PBOC) is trying to contain leverage and reduce speculation in the financial market. On the other, it is trying to help stabilize growth in an economy that is in the midst of painful restructuring and expanding at its slowest pace in 26 years.
The balancing act needed to achieve its goals will be a complicated task for the central bank, according to Zhang Xiaohui, assistant governor of the PBOC.
“China should keep its monetary policy prudent and stable, appropriately expand aggregate demand to avoid an overly-rapid economic slowdown and at the same time refrain from excessive money supply to prevent bubbles,” Zhang has said.
China has kept the same prudent monetary policy since 2011. However, in practice it has been slightly eased for a period of time to alleviate pressure from a slowing economy. As the country’s economic health continued to improve, policy makers announced that they would maintain “a prudent and neutral” policy in 2017.
Yi Gang, deputy governor of the PBOC, restated Wednesday that China should “maintain the prudent monetary policy, which is in a neutral state. A neutral state is neither tight nor loose.”
Analysts have said the shift indicated that China will lean toward monetary tightening should they need to curb any asset bubbles or mitigate financial risks.
Speculation of China’s shifting away from a relative easing policy has intensified since May last year, when an “authoritative figure” warned in a “People’s Daily” article that China may suffer a “systematic financial crisis” and economic recession should debt not be properly handled.
At the annual Central Economic Work Conference in December, the central leadership pledged to make a priority of preventing financial risks, saying that curbing asset bubbles would be more important in 2017.
Possible monetary tightening in other major economies and rising price pressure in and outside China have sparked talk of tightening in China this year, but analysts expect the central bank to focus tightening on money-market rates rather than raising benchmark interest rates this year.
As China’s central bank has shifted to a prudent and neutral monetary policy, it will likely be more careful in balancing its multiple goals.
On the one hand, the People’s Bank of China (PBOC) is trying to contain leverage and reduce speculation in the financial market. On the other, it is trying to help stabilize growth in an economy that is in the midst of painful restructuring and expanding at its slowest pace in 26 years.
The balancing act needed to achieve its goals will be a complicated task for the central bank, according to Zhang Xiaohui, assistant governor of the PBOC.
“China should keep its monetary policy prudent and stable, appropriately expand aggregate demand to avoid an overly-rapid economic slowdown and at the same time refrain from excessive money supply to prevent bubbles,” Zhang has said.
China has kept the same prudent monetary policy since 2011. However, in practice it has been slightly eased for a period of time to alleviate pressure from a slowing economy. As the country’s economic health continued to improve, policy makers announced that they would maintain “a prudent and neutral” policy in 2017.
Yi Gang, deputy governor of the PBOC, restated Wednesday that China should “maintain the prudent monetary policy, which is in a neutral state. A neutral state is neither tight nor loose.”
Analysts have said the shift indicated that China will lean toward monetary tightening should they need to curb any asset bubbles or mitigate financial risks.
Speculation of China’s shifting away from a relative easing policy has intensified since May last year, when an “authoritative figure” warned in a “People’s Daily” article that China may suffer a “systematic financial crisis” and economic recession should debt not be properly handled.
At the annual Central Economic Work Conference in December, the central leadership pledged to make a priority of preventing financial risks, saying that curbing asset bubbles would be more important in 2017.
Possible monetary tightening in other major economies and rising price pressure in and outside China have sparked talk of tightening in China this year, but analysts expect the central bank to focus tightening on money-market rates rather than raising benchmark interest rates this year.
