BEIJING (MNI) – Chinese liquidity conditions are likely to remain tight and balanced in the immediate future, the Xinhua News Agency reported on Monday, in a commentary on monetary policy in the first half of the year.
Although the People’s Bank of China’s monetary policy stance this year has been stable, as it was last year, the government’s deleveraging campaign has set new requirements for that policy. The monetary policy aim last year was to “keep liquidity condition reasonable and abundant”, compared with this year’s goal to “maintain overall stable liquidity conditions”, indicating that monetary policy this year will be stable and neutral, and neither loose nor tight, the Xinhua commentary said.
The PBOC has injected large amounts of liquidity into the interbank system this year to avoid the potential for a liquidity crunch. When the PBOC believed liquidity was relatively high, it drained liquidity from the interbank system — for example, at the end of June and the beginning of July — to direct the market to expect tight and balanced liquidity conditions in the future, Xinhua said.
The PBOC intends to keep money market rates reasonable. If money market rates were too high, then the real economy will be hurt; if they were too low, financial speculation will become rampant, Zeng Gang, the head of Banking Research Office at the Chinese Academy of Social Science’s Institute of Finance and Banking said, according to Xinhua.
Current money market rates are appropriate because the PBOC needs to prevent rates from rising too fast and hurting the financing of the real economy, Xinhua quoted Wen Bin, the chief analyst at China Minsheng Bank, as saying.
MONDAY, JULY 10, 2017 – 05:18