Central bank Governor Yi Gang on Tuesday said that China will strengthen its economic policy and continue efforts to lower interest rates on loans, reinforcing expectations of further support measures to revive an economy ravaged by the coronavirus pandemic.
In an interview published by the central bank, Yi said China’s economic fundamentals are unchanged despite many uncertainties and reiterated that its current stance on monetary policy will be more flexible.
“The People’s Bank of China will use various monetary policy tools to maintain sufficient liquidity, and keep the annual growth rate of M2 money supply and social financing significantly higher than last year,” Yi said.
“Since the virus outbreak, the central bank’s policy measures, including bank reserve requirement cuts, relending, rediscount facilities, have amounted to 5.9 trillion yuan (US$827.63 billion),” he said.
The central bank on Monday said that it had cut the reserve requirement ratio for big banks to 11 per cent.
China’s economy shrank 6.8 per cent in the first quarter, the first quarterly contraction in decades, as the coronavirus took a heavy toll.
“Chinese banks may face rising non-performing ratio, and pressure on disposing bad loans,” Yi said.
He assured that China will help banks, especially small and medium-sized banks, “to replenish capital through multiple channels, and improve their ability to handle bad loans”.
“The impact on the global economy from a prolonged pandemic, and overseas financial market turbulence, could affect China’s balance of payments and cross-border capital flows”, Yi said.
He added that the central bank will deepen reform of the loan prime rate, the benchmark lending rate, to help lower real lending rates, and will steadily unify benchmark deposit, lending rates and market interest rates.