China’s central bank rules out major stimulus because financial risks are ‘controllable’

China’s central bank has sought to counter market speculation that it would engage in a significant loosening of monetary policy next year to offset a slowing economy and trade uncertainties, saying that financial risks are “controllable” and economic growth will remain within a “reasonable range”.

“Monetary policy is still prudent,” said Sun Guofeng, who oversees the monetary policy department at the People’s Bank of China. He added there “will be no deluge of stimulus” but rather targeted adjustments, macro controls and discretion.

“Because the situation is comparatively complex, [we] need to be more forward-looking and flexible to counter it,” he told a media briefing in Beijing.

His comments came after a statement by the banks’ monetary policy committee a day earlier that did not say anything about the interruption of the “deleveraging” campaign to reduce excess debt and risky lending due to concerns about its impact on the weakening economy.

The lack of comment was taken by many market analysts as a signal that the central bank was planning to ease its policy in the new year to counter the economic slowdown.

The PBOC cut the required reserve ratio – the money that banks are required to hold in reserve at the central bank – four times this year and a week ago created a new targeted medium-term lending facility from which banks can borrow at a lower interest rate than they can otherwise to support lending to small and medium-sized private firms.