China has ‘tremendous’ policy room if US trade war worsens, central bank governor says

People’s Bank of China governor Yi Gang is set to meet US Treasury Secretary Steven Mnuchin in Japan over the weekend

The first meeting since the trade talks fell apart last month could pave the way for a meeting between Presidents Donald Trump and Xi Jinping at the end of June

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US Treasury Secretary Steven Mnuchin and People’s Bank of China governor Yi Gang. Photo: Handout

Published: 12:50pm, 7 Jun 2019Updated: 12:49pm, 7 Jun 2019

China has “tremendous” room to adjust monetary policy if the trade war with the United States deepens, People’s Bank of China Governor Yi Gang said.

“We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous,” said Yi in Beijing.

Asked if his scheduled bilateral meeting with US Treasury Secretary Steven Mnuchin on the sidelines of the Group of 20 gathering of finance ministers and central bank governors in Japan over the weekend would get negotiations with the US back on track, Yi said it would probably be a “productive talk, as always,” though the topic of the trade war would be “uncertain and difficult.”

That meeting takes place as the two nations escalate their trade war amid a darkening outlook for the global economy, with Citigroup and Morgan Stanley warning this week that it risks tipping the world into recession.

We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit, I think the room for adjustment is tremendous

Yi Gang

The first publicly announced meeting since the trade talks fell apart last month could pave the way for a meeting between Presidents Donald Trump and Xi Jinping, who is likely to be in Japan at the end of the month for the G20 leaders’ summit.