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Wendy Wu

China’s central bank says it has not used quantitative easing to shore up its economy following the slowdown in mainland growth.
Yin Yong, assistant governor of the People’s Bank of China said on Thursday existing policy tools were sufficient, while official foreign exchange reserves were robust enough to support liquidity.
Quantitative easing is an unconventional monetary policy used by central banks to stimulate the economy, such as introducing new funds into the money supply by buying the assets of commercial banks and other institutions when normal policies have failed.
Yin's remarks are the latest issued by the central bank in an attempt to dismiss concerns that it used unconventional methods to support the China’s economy and tackle issues over the security of its foreign exchange reserves.
Mainland foreign reserves fell sharply because they were used to support the yuan after the central bank’s surprise, one-off devaluation in mid August.
READ MORE: China’s central bank devalues the yuan 2 per cent – biggest drop since 1994 – in wake of stock market crash

Yin also defended China’s economy, saying the spillover effects of the economic slowdown had been overstated.
He told a financial forum in Beijing that China’s foreign exchange reserves had “ample” liquidity and could support the central bank’s foreign exchange market operations.
The scale of the reserves had been calculated according to International Monetary Fund standards and the investment portfolio was “highly safe and liquid”.
Yin said: “China’s foreign exchange reserves, their scale, quality and liquidity, can maintain financial security.”
China’s gross domestic product rose 6.9 per cent during this year’s third quarter from July to September – the slowest pace of growth for more than six years – fuelling concerns about a more rapid deceleration in the world’s second largest economy.
However, the external influences caused by China’s slowdown might not be as big as the market had thought, Yin said.
“There are other deep-rooted factors that led to the weak global economic recovery, price fluctuations in commodities and financial market turbulence” and it was not correct to “attribute the global economic slowdown completely to China’s slowdown”.
Yin said China’s contribution to the world economy was expected to increase to one third this year from a quarter in 2010.
China’s interest rates remained within “a normal range”, differing from the zero interest rate in quantitative-easing countries, while the scale of the central bank’s balance sheet had fallen since March, while those with commercial banks had increased.
He said there was a difference between with the situation in nations with quantitative-easing policies, which had seen central banks buying up assets to help private sectors to deleverage.
China had plenty of room available to flexibly adjust interest rates, Yin said.
“We have enriched and optimised paths and tools of monetary policy. We still have many instruments available to carry on with implementing our interest-rate and exchange-rate reforms.”
 


China’s central bank denies using unconventional methods to shore up slowing economy

The People's Bank of China, the mainland's central bank, says the spillover effects of the economic slowdown have been overstated. Photo: AFP

Global stocks and Asian currencies fell after China unexpectedly devalued its yuan in response to weakening trade and growth on August 11. Photo: AP

China slashes interest rates, banks' reserve ratio for the sixth time in a year in bid to stem slowdown after lacklustre third-quarter growth

Paramilitary policemen patrol in front of the People's Bank of China, China's central bank, in Beijing. Photo: AFP

China cuts interest rates in bid to halt stock turmoil and reassure markets after 'Black Monday' 

A securities firm in Tokyo displays China stocks. The PBOC cut interest rates after the Shanghai Composite Index closed more than 7 per cent down. Photo: Bloomberg

Germany’s DAX and other European stock markets rallied on news of China's rate cut. Photo: Reuters

The Shanghai stock index slumped to close 7.6 per cent lower on Tuesday, prompting the PBOC to cut interest rates again. Photo: Reuters

China Stock Turmoil 2015

China’s central bank devalues the yuan 2 per cent – biggest drop since 1994 - in wake of stock market crash

Global stocks and Asian currencies fell after China unexpectedly devalued its yuan in response to weakening trade and growth. Photo: AP

China's central bank has devalued the yuan by almost 2 per cent. Photo: AFP

China's central bank has devalued the yuan by almost 2 per cent. Photo: Bloomberg

The Chinese yuan and the US dollar lie under a pair of eyeglasses as the People's Bank of China devalued the currency on Tuesday by almost 2 per cent. Photo: Reuters