China central bank calls for boost to global policy coordination

The People's Bank of China has rolled out a raft of measures, including cutting lending rates and banks' reserve ratios and doling out cheap loans, to cushion the blow to the Chinese economy from the coronavirus outbreak.
The People's Bank of China has rolled out a raft of measures, including cutting lending rates and banks' reserve ratios and doling out cheap loans, to cushion the blow to the Chinese economy from the coronavirus outbreak.PHOTO: REUTERS

BEIJING • A Chinese central bank official yesterday called for stepped-up global policy coordination to manage the economic impact of the coronavirus outbreak, and said Beijing's recent policy measures were gaining traction while it had capacity for further action.

People's Bank of China (PBOC) deputy governor Chen Yulu also told a news conference that PBOC governor Yi Gang had exchanged views with United States Federal Reserve chairman Jerome Powell, as well as the International Monetary Fund and other agencies.

"The global epidemic is spreading rapidly. It's urgent for all countries to strengthen international coordination in macro policies such as public health policy, trade policy, and fiscal and monetary policy," Mr Chen said. "We will actively participate in international cooperation in response to challenges posed by the complex situation."

Mr Chen said that while downward pressure on the global economy is increasing as the virus rattles financial markets, he expects significant improvement in the Chinese economy in the second quarter.

Private-sector analysts are slashing their growth forecasts for China to lows not seen since the Cultural Revolution ended in 1976, with a sharp contraction expected in the first quarter.

"At present, the operation of China's financial market is generally stable, market expectations are relatively stable, and the space for macro policies and tool reserves are sufficient," Mr Chen said.

The PBOC will keep liquidity reasonably ample, keep growth of M2 money supply and total social financing in line with nominal gross domestic product growth and aim for slightly higher credit rise, he added.

The PBOC has already rolled out a raft of measures, including cutting lending rates and banks' reserve ratios and doling out cheap loans for selected firms, to cushion the blow to the economy from the coronavirus outbreak.

China, where the virus outbreak originated late last year in the central city of Wuhan, is widely expected to see its economy contract in the first quarter due to efforts to contain the spread of the disease.

 
 
 
 

While the coronavirus is expected to continue exerting upward pressure on China's consumer prices in the near term, inflation could ease in the coming quarters, Mr Chen said.

He also said he expects China's yuan currency to remain stable around seven to the US dollar in the near term, due in part to ample foreign exchange reserves.

The country's debt market is stable, with no significant rise in defaults, he said during a briefing where he was joined by other senior Chinese financial regulators.

China Banking and Insurance Regulatory Commission vice-chairman Zhou Liang said China is ready to buffer financial risks caused by the virus outbreak, and is studying plans to reform the country's asset management companies that are tasked with dealing with bad loans.

China's non-performing loan ratio rose to 2.08 per cent at the end of last month, Mr Zhou said, adding that China's banking sector has disposed of a total of 5.8 trillion yuan (S$1.2 trillion) in bad loans in the past three years.

REUTERS

 
A version of this article appeared in the print edition of The Straits Times on March 23, 2020, with the headline 'China central bank calls for boost to global policy coordination'. Print Edition | Subscribe