Enhancing Monetary Supply and Interest Rates Reduction: China's Central Bank Aims to Fuel Economic Growth
The People's Bank of China (PBoC) has announced that it will not be making any adjustments to interest rates or reserve requirements in the third quarter, according to senior China economist at the Economist Intelligence Unit, Xu Tianchen.
The PBoC's strategy is focused on economic growth, with a particular emphasis on boosting domestic demand. Instead of broad interest rate or reserve requirement ratio cuts, the PBoC is deploying a mix of monetary tools to ensure ample liquidity and support reasonable credit growth.
The bank's involution style is aimed at boosting growth in key sectors such as technology, green development, and elderly care. Loan growth to small and medium-sized tech enterprises is being accelerated to support industrial transformation, and efforts to promote RMB digital infrastructure and cross-border investment are being stepped up.
The PBoC is also addressing concerns related to competition in various parts of the economy. The bank's strategy involves a shift in focus to domestic demand, with a focus on targeted credit support and structural reforms over across-the-board interest rate or reserve requirement ratio cuts.
In summary, the PBoC is prioritizing targeted credit support and structural reforms over broad stimulus measures to boost domestic demand, emphasizing quality growth and stability rather than aggressive monetary easing at this time. The third quarter is not expected to see any changes in the reserve requirement ratio or interest rates, according to Xu Tianchen.
The PBoC's strategy encompasses targeting specific sectors like technology and green development, not just through interest rate adjustments, but also by accelerating loan growth to small and medium-sized tech enterprises. The bank's focus on quality growth and stability in the economy extends to the arts and finance, as they aim to promote digital RMB infrastructure and cross-border investment.
