China to maintain potential growth within reasonable range, has conditions to keep normal monetary policy – PBOC Governor Yi Gang

 

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China will maintain its potential economic growth rate within a reasonable range and the country has conditions to keep a normal monetary policy, positive interest rates and a normal and upward yield curve, Yi Gang, governor of the People’s Bank of China (PBOC), wrote in a paper published on the Economic Research Journal.

The central bank will leverage structural monetary tools and step up financial support for some important but lagging economic sectors, Yi said.

Despite dramatic changes in the interest rates in developed economies, China’s monetary policy remains committed to charting its own course, with notable improvement in autonomy and effectiveness, said Yi.

While strengthening counter-cyclical adjustments, the policymakers attach importance to cross-cyclical policy adjustment and cross-regional balance by considering complex factors such as time lag so as to ensure prudence and room for policy relaxation and tightening, Yi said. 

He said China’s monetary policy has always been within a normal range, with real interest rates largely matching potential economic growth rate, and China will refrain from adopting excessive stimulus and will not engage in quantitative easing.

China will steadily deepen market-oriented reform of foreign exchange rate, and stick with a managed floating exchange rate based on market supply and demand and adjusted in accordance with a basket of currencies, Yi said. He pledged efforts to enhance the flexibility of the yuan’s exchange rate, strengthening expectation management and insisting bottom-line mindset so as to prevent risks and ensure the yuan’s stability at a reasonable level.