How China will sustain its currency

The People’s Bank of China promised to maintain its neutral monetary policy and keep liquidity and credit growth steady while the yuan currency remains fairly stable.

The central bank said that it will avoid systemic risks and use multiple monetary policy tools to ensure financial stability in the world’s second largest economy.

“On the one hand, it is necessary to control the liquidity scale to help deleverage and prevent financial risks. On the other hand, it is necessary to comprehensively consider changes in the macroeconomic environment and strengthen policy coordination,” the Central Bank said.

The bank also mentioned that it will strike a balance between stabilising economic growth, pushing structural changes and preventing risks.

China’s overall debt level rose 2.7% points in 2017 to 250.3% of GDP due to impacts from China’s supply-side reforms, improving economy and corporate profits.

The bank stated that the corporate debt ratio has fell 0.7% points last year to 159% of GDP – the first decline since 2011, while household debt ratio climbed 4% points to 55.1% of GDP.

The Central Bank plans to include negotiable certificates of deposit (NCDs) issued by financial institutions with assets of less than 500 billion yuan ($79 billion) in its quarterly macro-prudential assessment (MPA) from the first quarter in 2019.

The Central Bank reaffirmed that it will keep the yuan basically stable while increasing the currency’s two-way fluctuations and deepening market-based currency reforms.



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