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Bloomberg
China isn’t in a rush to add massive monetary stimulus, in contrast with other central banks around the world, and must maintain a prudent policy stance, central bank Governor Yi Gang said.
Overall financial risks are contained and those in the shadow banking sector and some key institutions have been resolved, said Yi, speaking at a joint briefing in Beijing with Finance Minister Liu Kun and National Bureau of Statistics head Ning Jizhe.
Even as China grapples with growth on pace for the slowest expansion in almost thirty years, policy makers are holding back from all-out stimulus as they continue efforts to rein in financial risks. That’s in contrast to central banks such as the Federal Reserve and the European Central Bank, which are either cutting borrowing costs further or flagging a willingness to do so.
“Chinese officials remain determined to avoid quick and easy reflation,†said Frederic Neumann, co-head of Asian economics research at HSBC Holdings Plc in Hong Kong. “Interest rates may still need to come down in the coming months to cushion the slide in growth. Anyone expecting a sharp Chinese growth bounce, however, may be disappointed.â€
Futures on China’s 10-year government bonds reversed gains as Yi spoke, and the yield on cash bonds extended an increase. Interest rates are appropriate and the central bank has ample monetary policy tools, the PBOC said in a statement ahead of the briefing, reiterating the People’s Bank of China’s policy stance. Inflation remains relatively moderate, Yi said, and the central bank will remain patient.
“We are not in a rush to roll out massive rate cuts or QE like some other central banks,†he said.
China’s industrial production in August rose at the slowest single month pace since 2002, exports contracted and a producer prices index fell deeper into deflation. That’s adding pressure on policy makers to do more to support the economy amid the risk of yet-higher tariffs in the trade war with the US, and slowing global growth.