PBOC vows to fine-tune policy as Chinese factory activity slows
PMI index contraction latest challenge as Beijing contends with deflation and property slump
People's Bank of China governor Zhou Xiaochuan yesterday vowed to fine-tune monetary policy when needed, in comments that came after new data showed manufacturing activities contracted last month.
Zhou's new year statement followed the PBOC monetary policy board's conclusion that the country's economic growth remains reasonable even as it warned about the complexity of the domestic and international situation, including volatile commodities prices.
A slowdown will pose more challenges to the central bank's policy balancing as it contends with deflationary pressures, a property market slump, and high leverage in the corporate sector.
The PBOC said in a statement summarising discussions at its quarterly monetary policy meeting that it would "flexibly use multiple monetary tools, maintain appropriate liquidity, and achieve reasonable growth in the size of money, credit and social financing".
Qu Hongbin, the chief economist for China at HSBC, said: "We believe that weaker economic activity and stronger disinflationary pressures warrant further monetary easing."
The PBOC recently included interbank deposits into its loan-deposit ratio calculations to expand banks' loanable funds. But analysts still believe cutting banks' reserve requirement ratios would more effectively boost liquidity.