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China says in 'no rush' for economic stimulus

China says in 'no rush' for economic stimulus

File photo of Chinese Yuan (Photo: AFP/Fred Dufour)

BEIJING: China is in "no rush" to add a monetary stimulus to cope with downward pressure on the world's number-two economy, the head of the country's central bank said Tuesday (Sep 24). 

A lingering trade war with the United States and cooling growth has raised expectations that Beijing may resort to an a round of stimulus measures to provide a kickstart.

Major central banks, including the Federal Reserve and the European Central Bank, have also cut borrowing rates or signalled the willingness to do so in recent months.

"We are in no hurry to take measures similar to central banks of other countries, such as relatively big interest rate cuts or quantitative easing polices," People's Bank of China boss Yi Gang said in a briefing ahead of the country's 70th anniversary.

He said there was no pressing need for big policy easing steps or to further cut the amount of cash lenders must keep in reserve to release more money into the stuttering economy.

"Monetary policy must remain prudent," he said, adding that there was ample room for both fiscal and monetary policy manoeuvering.

Earlier this month, the PBoC slashed reserve requirement ratios for banks, freeing up about US$126 billion to boost lending to mostly small and medium enterprises.

China's economy showed signs of strain as industrial output in August grew at the slowest pace in 17 years and as investment and retail sales flagged.

"There is indeed downward pressure on the whole world economy," Yi said.

"But our overall judgment is that China's current economic operations are still in a reasonable range," he said.

China, while trying to keep its debt levels steady, should step up reforms and improve the monetary policy transmission mechanism to help lower financing costs, Yi said.

Some policy insiders have said that room for the government to step up stimulus measures could be limited by its worries about rising debt risks and possible property bubbles.

The economy expanded 6.2 per cent in April-June, the worst reading since the early 1990s but in line with forecasts and within the government's target range.

Beijing was taking steps to boost domestic consumption and investment, and contain financial risks to battle economic headwinds, National Bureau of Statistics head Ning Jizhe said at the same news conference.

China's economy has also been hit by a bruising trade spat with the United States, with the two sides swapping tariffs on a total of US$360 billion worth of goods.

Washington and Beijing have recently extended olive branches ahead of trade talks next month with the US delaying a new round of tariffs by two weeks and China exempting some products from punitive duties.

READ: Trump is serious about US divorce from China, a commentary

FISCAL STIMULUS

Beijing has leaned more heavily on fiscal stimulus to address the current downturn, announcing trillions of yuan in tax cuts and special local government bonds to finance infrastructure projects.

Ning, vice head of the National Development and Reform Commission, told reporters at the same briefing that China would step up efforts to stabilise growth, including speeding up project construction and relaxed restrictions on auto purchases.

Ning said cities including Xian, Kunming, Guiyang are considering abolishing or easing restrictions on auto purchases, following recent steps in Guangzhou and Shenzhen.

Local governments will be allowed to issue special bonds earlier than usual in 2020, focusing on areas including transportation, energy, environmental protection, logistics and urban infrastructure, Ning said.

Finance Minister Liu Kun said during the same briefing that local governments are on track to complete bond issuance within the annual quota by the end of September, and allocate proceeds to investment projects by the end of October.

Beijing has set a quota of 2.15 trillion yuan (US$302.5 billion) for local governments to sell special bonds this year to fund infrastructure, including road, rail and water projects. 

Source: Agencies/nh

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