PBOC panel signals shift to growth, market stabilisation

Bloomberg

China’s central bank said it’ll keep economic development steady and stabilise market expectations, and reiterated a more cautious tone on debt containment.
The People’s Bank of China will keep a close eye on domestic and global economic developments and step up “forward-looking policy fine-tuning,” according to a statement released after a meeting a day earlier of the monetary-policy advisory committee led by Governor Yi Gang. The meeting was the panel’s first since Yi took office in March.
The stress on economic growth wasn’t mentioned in a statement released after the last meeting at the end of 2017, signalling that the central bank is ready to pay more attention to growth stabilisation amid a domestic economic slowdown and rising trade tensions.
The central bank will work to “make sure the structural deleveraging progresses with the right strength and at the right pace,” the statement said, echoing a comment Yi made in an interview with the Shanghai Securities Daily last week. That dials back the stance from the previous meeting, at which the panel called for “effective control of macro leverage ratio.”

FINE-TUNING POLICY
The report from the central bank is seen as a signal that China’s monetary policy will be a bit looser than earlier expected, said Shen Zhengyang, Shanghai-based strategist with Northeast Securities Co. This shows authorities’ support for the market and helps sentiment, he said. The Shanghai Composite Index was up 1.1 percent from a two-year low at 10:54 a.m. local time.
The statement reflects a “fine-tuning” in the PBOC’s stance, a correction from overly tight monetary policy to neutral, which means marginal easing, according to Ding Shuang, chief economist for Greater China & North Asia at Standard Chartered Bank Ltd. in Hong Kong. “Now the central bank isn’t that worried about the overall debt. It’s becoming more patient on dealing with the leverage problem.”
While monetary policy sho-uld remain prudent and neutral, the PBOC will keep a ba- lance between tightening and easing and ensure appropriate and sufficient market liquidity, the statement said.