China’s Central Bank PBOC to Deploy Various Tools to Combat Economic Downturn

Beijing, Hong Kong China’s central bank wants to dig deep into its tool kit to fight an economic downturn in the world’s second largest economy. The People’s Bank of China (POBC) head of monetary policy, Zou Lan, said at a news conference on Friday that the Chinese central bank will make full use of its various monetary policy tools depending on the state of the economy and price developments.

These included medium-term lending to commercial banks, open market operations and also the reserve ratio for commercial banks (RRR). The lower this rate, the more loans commercial banks can grant.

“In recent years, China has insisted on the implementation of prudent and normal monetary policy with sufficient monetary policy space and a wealth of monetary policy tools,” Zou said. The central bank will ensure that credit growth remains appropriate. She will guide banks to increase their lending to small and private businesses. Deputy central bank governor Liu Guoqiang added at the press conference that the monetary authorities would step up their “anti-cyclical adjustments” to support the economic recovery.

The export world champion China had recently felt the economic slump in important trading partners. Exports from the People’s Republic were 12.4 percent lower in June than a year earlier – the largest decline since the start of the corona pandemic more than three years ago. The global economic slowdown and weakening domestic demand slowed down the economic recovery in recent months.

For the past second quarter, economists only expect economic growth of 0.5 percent. According to insiders, China’s financial regulators have now invited some of the world’s biggest investors to a rare symposium next week in Beijing. This is intended to encourage foreign investors to invest in the People’s Republic despite the economic weakness and increasing geopolitical tensions, said three people familiar with the process.

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