China’s economy set to receive ‘necessary support’ for coronavirus recovery this year, central bank says
- The People’s Bank of China says there will be no major U-turn on its policy stance this year
- Officials say no immediate need to adjust benchmark interest rates or cut the reserve requirement ratio
China’s central bank on Friday played down the urgency of an immediate change in key interest rates and vowed to maintain necessary monetary support for economic recovery from the pandemic, amid growing expectations it will gradually tighten credit conditions this year.
Officials at the People’s Bank of China (PBOC) were also calm about the rapid appreciation in the yuan’s exchange rate and recent fluctuations, although they said a strong Chinese currency was unfavourable for exports and could help draw in speculative “hot money” to the nation’s financial markets.
With China’s economic recovery expected to gather steam this year, observers have forecast the PBOC is likely to begin tapering off its expansionary monetary policy in coming months and refocus on reducing financial leverage and debt, after a series of state-owned firms defaulted on bond payments and household indebtedness increased following the pandemic.
In 2021, our prudent monetary policy will be more flexible, targeted, reasonable and appropriate, to maintain necessary support for economic recovery,
But Chen Yulu, vice-governor of the PBOC, said the central bank will be guided by the principle of economic stability and will not make a sharp U-turn on its policy stance this year.
