China’s central bank to use ‘precise, forceful’ policy to bolster recovery

BEIJING – China’s central bank said on Wednesday it will step up policy adjustments and implement monetary policy in a “precise and forceful” manner to support an economy whose recovery was improving with “increasing momentum”.

The People’s Bank of China (PBOC) will keep liquidity reasonably ample and maintain stable credit expansion, it said in a statement after a quarterly meeting of its monetary policy committee.

“The current external environment is becoming more complex and severe, international economic trade and investment are slowing down, inflation is still high and interest rates in developed countries remain high,” the central bank said.

“The domestic economy continues to recover and improve, with increasing momentum, but it still faces challenges such as insufficient demand.

“We need to continue to work hard and take advantage of the improving momentum, step up macro policy adjustments and implement the prudent monetary policy in a precise and forceful manner.”

The wording in the latest comments was consistent with the line taken earlier by the PBOC, though the remarks on the economy appeared slightly more positive as the central bank had said in its April statement that the recovery lacked solid foundations.

The world’s second-largest economy is showing some signs of stabilising even as it contends with a property downturn, ageing demographics, high debt and geopolitical tensions.

While profits at China’s industrial firms extended a double-digit drop for the first eight months, the pace of declines eased slightly as a flurry of policy support steps has started to stabilise parts of the stuttering economy.

The 11.7 per cent year-on-year fall in profits narrowed from a 15.5 per cent contraction for the first seven months, in line with expectations and potentially suggesting a modest recovery is beginning to take root for some businesses.

That was backed up by August earnings posting a surprise surge of 17.2 per cent from a year earlier, data from the National Bureau of Statistics showed on Wednesday. Profits were down 6.7 per cent in July.

The central bank will guide banks to lower borrowing costs for companies and households and support banks to replenish capital, the PBOC said.

China will step up government investment and policy incentives to spur private investment and promote a recovery in prices from a low level, it said.

The PBOC reaffirmed its stance of keeping the renminbi stable and preventing the risk of currency overshooting.

The central bank also pledged to promote the healthy and stable development of the property market, implementing policies to lower down-payment ratios and mortgage rates for some home buyers.

It said it will step up its support for the building of public infrastructure for both normal and emergency use in megacities, the transformation of “urban villages”, or underdeveloped areas, and affordable housing.

The Cabinet has announced guidelines to boost investment in such areas as part of efforts to support the economy. REUTERS