People’s Bank of China Announces Measures to Boost Economy

China’s central bank, the People’s Bank of China (PBOC), is taking proactive steps to support the nation’s robust economic recovery, according to Pan Gongsheng, the PBOC’s governor. These measures include reducing financing costs, maintaining ample liquidity, and safeguarding financial stability.

Addressing the Annual Conference of Financial Street Forum 2023 in Beijing, Pan stated that the PBOC would provide liquidity support to indebted local governments when necessary and prevent risks in the property market from spreading to other sectors. Experts interpret these remarks as a signal of the PBOC’s commitment to reinforcing the ongoing economic recovery momentum.

To achieve these goals, the PBOC may consider cutting the reserve requirement ratio (RRR) this month, with the possibility of another interest rate cut later in the year. These actions aim to stimulate economic growth, which has shown signs of strengthening recently, with increased production and consumption, improved employment, and inflation trends.

Pan emphasized that the PBOC would maintain interest rates at a level conducive to achieving the economy’s potential growth rate, ensuring lower financing costs for the real economy while maintaining overall stability. The central bank’s focus is on supporting sustainable and high-quality development, with particular attention to technological innovation and small private enterprises.

In line with recent financial directives, the PBOC aims to create a favorable monetary and financial environment, providing high-quality financial services to key strategic areas and addressing weak points in the economy. While there may be room for interest rate cuts, the central bank is cautious about excessive stimulus to avoid compromising long-term economic prospects.

Pan also highlighted efforts to manage government debt and transition local government financing vehicles into financially independent, sustainable entities that do not rely on government credit. Emergency liquidity support for regions burdened with heavy debt may be provided through a special purpose vehicle, a monetary policy tool.

Regarding the property market, Pan reassured that its correction has had a manageable impact on the financial system. Real estate-related loans represent only 23 percent of the outstanding value of bank loans, and property market transactions have improved since August. The PBOC aims to prevent property market risks from affecting other sectors while meeting the reasonable financing needs of real estate enterprises and maintaining their key financial channels, such as loans and bonds, stable.

In conclusion, the People’s Bank of China is actively implementing measures to support China’s economic recovery, focusing on reducing financing costs, ensuring ample liquidity, and safeguarding financial stability. These efforts align with the goal of achieving sustainable and high-quality economic development while managing potential risks in the financial system and property market.