China has ample room for implementing monetary policy to deal with unexpected challenges and changes, said Zou Lan, head of the monetary policy department of the People’s Bank of China, at a press briefing on Wednesday.
The PBOC will continue to implement a targeted, powerful, and prudent monetary policy and step up its counter-cyclic adjustments and policy reserves and promote high-quality economic development with quality financial services, said Zou.
China’s central bank will use multiple policy tools to keep reasonably ample liquidity, give full play to state-owned banks as pillars to make credit loans grow more steadily, continue to make good use of existing structural policy means, and ensure the renewal of expired policy tools, Zou said.
The PBOC should steadily guide the cost of financing for the real economy down and encourage banks to cut their interest rates for outstanding home loans, Zou said.
Mortgage loan rate cuts are underway, with more than 90% of qualified borrowers expected to benefit from the adjustment, he said, adding that the rates for the remaining borrowers will be lowered by the end of next month.
Reducing the interest rates for outstanding home loans will ease the interest burden on residents and considerably increase their spending power, Zou said.
The PBOC will continue to keep an eye on the market, protect good market order, and promote orderly interest rate cuts for outstanding home loans, he added.
The PBOC and the State Administration of Financial Supervision and Administration said on Aug. 31 that they would allow commercial banks to lower the interest rates for qualified outstanding first-home mortgage loans from Sept. 25, giving borrowers the chance to replace their loans with new ones with a lower rate or ask lenders to lower the rate of their existing contracts.
Zou also noted that the PBOC will make full use of policy tools to regulate the supply and demand of the foreign exchange market to prevent exchange rate overshooting.
China uses a managed floating exchange rate regime based on the market supply and demand and adjusted depending on a basket of currencies. The exchange rate of the Chinese yuan against the US dollar is very important, but it is not the whole yuan exchange rate, so it should be viewed comprehensively, while more attention should be paid to the exchange rate changes of the yuan against other currencies.
China has been implementing policies to stabilize economic growth and expectations recently, and, as a result, the macroeconomy has positively changed, Zou said. The country’s economy is gradually picking up, creating a solid foundation for the yuan exchange rate to remain stable at a reasonable and balanced level, he added.
The PBOC and the State Administration of Foreign Exchange have gathered rich experience tackling external challenges and have enough policy options, so China has the ability, confidence, and favorable conditions to maintain a stable exchange rate market, Zou concluded.
The PBOC and the SAFE aim to stabilize the yuan exchange rate at a reasonable and balanced level, crack down on behaviors disturbing the market order, and prevent exchange rate overshooting.
Moreover, the PBOC will guide financial institutions to provide active and stable support to dissolve local government debt risks and form a regular regime to supervise the financial debts of financing platforms, Zou noted.