China: Central Bank promises more support for the real economy

The People’s Bank of China (PBOC) has pledged greater support for the real economy and said it would make monetary policy more forward-looking and targeted, according to Bloomberg.

There will be more “prudent” use of monetary policy instruments, the People’s Bank of China said on Saturday.

The monetary policy committee met on Friday under the chairmanship of Governor Yi Gang, he said.

The central bank also reiterated its goal of promoting the “healthy” growth of the real estate sector and protecting the rights of home buyers, as well as working to better meet housing demand.

The PBOC has so far taken a modest approach to monetary stimulus, but expectations are high that it will do more in the new year, especially if real estate problems and a slowdown in private consumption continue. With many global central banks, including the Federal Reserve, seeking to strengthen their policies or already raise interest rates, further monetary easing by the PBOC would widen this gap and could begin to put pressure on the currency.

The PBOC allowed banks to cut their benchmark lending rate by 5 basis points earlier this month after releasing 1.2 trillion yuan ($ 188 billion) in cash, reducing the amount of funds banks are required to hold in reserve.

It also cut interest rates on the small business refinancing program, with credit expansion accelerating in November after a slowdown for almost a year. Analysts expect more easing next year, including further cuts in the reserve requirement index and possibly lower interest rates, as the continued slowdown in real estate is likely to continue to slow growth next year. The authorities also signaled more budget support in early 2022 to boost investment and infrastructure.