JAKARTA (TheInsiderStories) – The People Bank of China (PBoC) injected 50 billion yuan (US$7.14 billion) into the banking system via reverse repos at an interest rate of 2.2 percent on Monday (07/13). It is the first injection in July, aiming to ensure banking liquidity is at a reasonable and sufficient level.
Investors expect the central bank to keep its policy easing stance and continue to support credit to the economy. In the first half of the year, Chinese banks loaned a record high of 12.09 trillion yuan. However, Guo Kai, deputy director of the monetary policy department of the PBoC, told reporters on Friday that the central bank isn’t planning much more stimulus, according to Xinhua.
″(Some recent) policies and measures were made in response to the coronavirus outbreak, and once they completed their mission they have exited,” he said.
As an example, he pointed to two special loan programs worth a combined 800 billion yuan that had completed their respective purposes of supporting the production of medical supplies and resumption of work.
“In the next half of the year, the economy will return to normal, and the role of traditional monetary policy may become more obvious,” Guo said at the press briefing. “We have entered a more normal state.”
During the first three months of the year, China’ economy contracted by 6.8 percent after more than half of the country extended a Lunar New Year holiday shutdown by at least a week in February in an effort to limit the spread of COVID-19. The disease first emerged late last year in the Chinese city of Wuhan.
The outbreak stalled within the country by mid-March, while accelerating its spread overseas in a global pandemic that has since infected more than 12.8 million people worldwide and killed more than 567,000 people. The world economy is expected to fall into a recession this year as other governments have limited social gatherings. That drop could significantly affect demand for exports from China, which is still generally expected to eke out national growth this year.
The central bank’ statistics department head Ruan Jianhong said Friday that out of 10,000 enterprises surveyed nationwide, 90.7 percent of those in the services industry had reopened as of June 15. For those in industrial work, utilization of equipment was at least the same as the average level of the second quarter last year, Ruan said.
China is set to release second-quarter GDP and other key economic data this week.
“Right now, we put greater emphasis on the word ‘moderate,’” Guo said, pointing to considerations about future changes to the credit supply and prices.
PBoC data released Friday showed that amid the height of the coronavirus outbreak in the first half of this year, Chinese banks loaned a record high 12.09 trillion yuan, which Reuters pointed out is roughly equivalent to Canada’s GDP.
″(We must) recognize that appropriately lowering interest rates doesn’t mean the lower, the better,” Guo said. “If rates are far too low … that may cause a problem of capital flowing to where it shouldn’t.”
Written by Lexy Nantu, Email: firstname.lastname@example.org