Faced with risks and challenges, the People’s Bank of China (PBOC) cautioned that it will continue to implement a prudent policy to guide reasonable credit and financing growth in 2019.
PBOC kept the interest rate on a downward trajectory in 2018, and stabilized yuan and macro leverage ratio, said PBOC Governor Yi Gang on Sunday.
By the end of 2018, China’s total macro leverage ratio was 249.4 percent, a decrease of 1.5 percentage points from 2017.
China still has room to cut the reserve-requirement ratio
To ensure liquidity, the appropriate increase of monetary credit and social financing, China has cut required reserve ratio five times in 2018, reducing the required reserve ratio (RRR) by a total of 3.5 percentage points.
After the 2008 financial crisis, the required deposit reserve ratio of developed countries is relatively low, but the excess deposit reserve ratio is relatively high. For developing countries, a certain level of required deposit reserve ratio is still appropriate. China still has some room to cut the reserve-requirement ratio, but not as much as a couple of years before, Yi said.
China will not use the exchange rate as a trade tool
Both China and the United States have agreed that the market should play a decisive role in determining currency rates and oppose deliberate currency devaluation for competitive purposes, Yi said.
China will not use the currency exchange rate as a tool to boost output or resolve trade frictions for competitive purposes, Yi said. He added that China is on track to further open financial markets according to the timeline.
Despite the pressure of RMB devaluation, global market recognizes China’s efforts and achievements in stabilizing the RMB exchange rate. China’s foreign exchange reserve has decreased a trillion U.S. dollars in the past several years, Yi said.
China has cut financing costs for small and micro-sized businesses
China has taken a number of measures, including tax exemptions and targeted RRR cuts, to encourage banks to support small businesses.
After PBOC launched the bond market financing support tool in October last year, the overall social financing environment has been improved, Pan Gongsheng, deputy governor of PBOC and Administrator of the State Administration of Foreign Exchange, said.
The growth of outstanding total social financing, a broad measure of credit and liquidity in the economy, reached 10.1 percent in February, totaling 703 billion yuan, central bank data showed Sunday.