Update: Central bank chief promises not to release a wave of liquidity

China will not flood its liquidity economy, many economies around the world relaxing their monetary policy, said Tuesday the head of its central bank.

"We are not in a hurry to make relatively large rate cuts or quantitative easing as other central banks have done," said the governor of the People's Bank of China (PBOC). Yi Gang said (link in Chinese) at a press conference in Beijing.

Yi said that China would continue to balance the economic expansion and the growth of the money supply with the stabilization of the leverage effect on the whole economy and the maintenance of the debt under control.

China has maintained the one-year borrowing rate of the PBPC's medium-term facility, a key interest rate for bank lending, unchanged this year. In contrast, the US Federal Reserve has reduced reference rates twice this year and the European Central Bank has reduced deposit facility rate of 10 basis points, to -0.5%, and decided to resume quantitative easing measures in order to avoid an impending recession.

At the press conference, Yi said that China's interest rates were at an appropriate level, although it is still possible to adjust them according to the economic situation and the level of inflation. .

Earlier this month, the PBOC lowered reserve requirement ratio (RRR) of 50 basis points for all banks. This reduction, along with two targeted RRR cuts planned for the next two months, will release about 900 billion yuan (126.35 billion US dollars) for long-term loans.

In recent months, the Chinese economy has been under increased downward pressure, with several major economic indicators falling between worse than expected in the midst of soft domestic and world demand.

In his talks on China's approach, Yi said his country would rely mainly on structural reforms.

This year, China has reduced corporate taxes and reorganized banks' pricing of loans. Finance Minister Liu Kun said at the press conference that the government's tax cuts would exceed the 2 billion yuan earmarked by politicians, though it does not say how much. He added that the manufacturing sector was the main beneficiary of the tax cuts.

Last month, the central bank adopted new reference rates for lenders to set the price of loans – preferential rates on domestic loans (LPR) – are part of the PBOC's long-standing efforts to liberalize interest rates by giving the market more influence over the costs of loans. borrowing. The national LPR of one year slightly down 5 basis points to 4.2% last week. MLF is a reference rate for national RPMs.

Contact reporter Guo Yingzhe ([email protected])