The central bank

Date: 2021-09-08
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Is China's monetary policy likely to change against the backdrop of a possible shift in monetary policy among global economies? Is there a gap in the monetary base? What is the liquidity position now and in the future? In order to promote common prosperity, what policies and measures will the People's Bank take?

Pan Gongsheng, deputy governor of the People's Bank of China and director of the State Administration of Foreign Exchange, Sun Guofeng, director of the Monetary policy Department of the People's Bank of China, and Zou LAN, director of the financial market Department of the People's Bank of China, answered reporters' questions at a regular policy briefing of The State Council yesterday.

China's monetary policy is still in the normal monetary policy range

Since the outbreak of the epidemic in the first quarter of last year, major developed economies have implemented highly intensive quantitative easing monetary policies and substantially expanded central bank balance sheets. Pan gongsheng said That China has been adhering to a prudent monetary policy, monetary policy is still within the normal range of monetary policy, not 'indiscriminate'. The People's Bank of China has more room for monetary policy.

Pan pointed out that the People's Bank of China will continue to implement prudent monetary policy, maintain reasonably abundant liquidity, and ensure that the growth of money supply and social financing basically matches nominal economic growth. At the same time, we will do a good job in designing cross-cyclical policies and take into account the coordination between this year's and next year's monetary policies.

Mr Pan said the People's Bank of China would 'give priority to itself' in its monetary policy deliberations, making monetary policy more independent. In structural monetary policy, we will increase policy support for key areas and weak links. For example, we will give full play to the directional support role of relending and rediscounting tools, further use the two monetary policy tools directly to the real economy, and make good use of the new 300 billion yuan small relending line proposed at the Executive meeting of The State Council.

'An additional 300 billion yuan of small re-lending will be issued in the four months from September to December. At the same time, the People's Bank of China has adopted a 'loan before loan' model to ensure the accuracy and directness of the use of funds.' Pan gongsheng said.

Liquidity supply and demand will remain basically balanced in the coming months

'China does not have a large monetary base gap.' 'Since the beginning of this year, the PBOC has implemented a prudent monetary policy and used a variety of monetary policy tools, including reserve requirement ratio cuts, re-lending, medium-term lending facilities and open market operations, to supply base money. The operations have become more forward-looking, effective and precise, and maintained reasonably abundant liquidity,' Sun said.

Sun Guofeng took DR007, the most important indicator to observe liquidity, as an example to illustrate that from this indicator, the money market runs smoothly with no big fluctuations at the end of the month and the end of the quarter, and the deviation of the 7-day operating rate relative to the open market is at the lowest level in recent years. In August, the average value of DR007 was 2.15%, 5 BP lower than the open market operation 7-day reverse repo rate. After the RRR cut in July, financial institutions used the long-term funds released by RRR cut to repay part of the medium-term lending facilities, and the liquidity needs of financial institutions were fully met. He believes that the supply and demand of liquidity will remain basically balanced in the next few months, and there will not be a big gap or big fluctuations.

'The People's Bank of China has sufficient tools to smooth out periodic fluctuations in liquidity caused by factors such as fiscal revenue and expenditure and government bond issuance,' Mr. Sun said. 'We can keep liquidity reasonably abundant.'

He said that in recent years, improve the liquidity and market interest rates of the people's bank of framework, transparency, through the operation of the consistency and stabilize the market expectations expected management, effectively reduce the demand for the preventive liquidity of financial institutions, making maintenance money market declining the amount of liquidity required for smooth operation. That is, under current conditions, it may not take as much liquidity to keep money market rates running smoothly.

There is much room to play in promoting common prosperity

Pan gongsheng believes that the financial and monetary policies led by the People's Bank of China have a lot of room to play in promoting common prosperity. Over the past few years, the financial system has played a very big role in poverty alleviation by investing a lot of resources. Financial poverty alleviation has made an important contribution to winning the battle against poverty.

Zou said the pboc still has a lot of work to do in promoting common prosperity.

For example, we will refrain from indiscriminate irrigation, properly implement our monetary policy and keep the value of the RMB stable, which is very important to promoting common prosperity. Improve the balance of financial support for regional development and implement the re-loan policy for provinces with slow credit growth; In key areas and weak links of the financial support, including advancing consolidate development crucial achievements and rural poverty to revitalize the work, to develop the pratt &whitney finance, further promoting the rural credit system construction, improve the rural payment service environment, strengthen financial knowledge propaganda and education and financial consumers' rights and interests protection, etc., let people safely enjoy equality, modern financial services; We will promote the steady and sound development of the real estate market, adhere to the principle of 'housing rather than speculation', implement prudent financial management of the real estate market, and increase financial support for the housing rental market. We will promote the sound development of all types of capital regulations and resolutely prevent the disorderly expansion of capital.


(Source: Shanghai Securities News)

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