Monetary tools seem to help stabilize the economy

A teller counts cash at a bank in Taiyuan, Shanxi province. [Photo/China News Service]

Efforts will be made to enable struggling market players to cope with the pressure

China will step up the use of structural monetary tools to help struggling market participants and cushion economic headwinds in a targeted manner while avoiding large swings in cross-border capital flows, officials and experts said.

Chen Yulu, vice governor of the People’s Bank of China, said the central bank will place more emphasis on stabilizing economic growth and better use the role of monetary policy to bolster support for the real economy.

Every effort will be made to help struggling market players overcome difficulties, including rolling out a loan facility with a quota of 100 billion yuan ($14.86 billion) to support transportation businesses as soon as possible. and warehousing, Chen said in an interview with Xinhua. News agency published on Saturday.

The country will support those severely affected by the COVID-19 outbreaks to extend loan repayments and accelerate the development of lending and movable asset lending to hard-hit businesses such as those in the restaurant, cultural and business sectors. trips, he said.

Chen added that the PBOC will strengthen support for banks to issue perpetual bonds that will improve their lending ability and promote fee reduction by financial institutions to ease the burden on businesses and individuals.

“The multitude of targeted support measures for companies and individuals hard hit by the COVID-19 outbreak will make it easier for them to obtain financing, reduce their financing costs and help them overcome the current difficulties,” said Wen Bin, chief researcher at China Minsheng. Bank.

The measures come amid China’s increased use of monetary tools. Since April, the PBOC has launched two targeted loan facilities aimed at technological innovation and elderly care services, and increased the quota of a 100 billion yuan loan facility to support utilization and reserves. of coal.

The PBOC will play the role of monetary policy on the aggregate and structural fronts, proactively intensify the use of structural monetary tools and increase the quota of on-lending facilities for the agricultural sector and small businesses in due course, the first the central bank’s quarterly monetary policy report was announced on Monday.

Also in favor of structural tools, the PBOC said in an article on Friday that structural monetary instruments have a “unique advantage” of precisely stimulating credit expansion in weak links in the economy and are conducive to maintaining levels. abundant liquidity.

Experts said recent developments have signaled that structural tools could dominate China’s monetary policy support in the near term, which will help ease downward pressure without significantly amplifying the pressure facing China. cross-border capital flows in the context of US monetary policy tightening.

Talking about the ripple effect of monetary tightening in developed economies, Chen, deputy central bank governor, said China is able to cope with this effect given the country’s steady pace of recovery, controllable inflationary pressure and optimized economic structures.

Yang Haiping, a researcher at the Institute of Securities and Futures at the Central University of Finance and Economics, said structural monetary tools, instead of aggregate tools such as interest rate cuts interests, could be the focus of short-term monetary policy given the abundance of domestic liquidity and the external pressure of US tightening.

Yang said he expects the country to make structural monetary facilities available to more financial institutions and regions, adding that more structural tools may be unveiled. .

The onshore exchange rate of the yuan against the U.S. dollar fell to 6.73 on Monday afternoon, the lowest level since November 2020, weakening more than 400 basis points from Friday’s close.

Due to the strengthening US dollar and falling global financial asset prices, China’s foreign exchange reserves also fell to $3.1197 trillion at the end of April, down $68.3 trillion or 2, 14% from the previous month, the State Administration of Foreign Exchange said on Saturday. .

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