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17-03-2025
BEIJING/ SHANGHAI: China should choose the right timing and force in easing monetary policy, state media said on Saturday in the latest signal that further easing to boost the world’s second-largest economy may not be imminent.
Days before the article in the official Shanghai Securities News, the central bank pledged to adjust monetary policy at the appropriate time to support an economy facing escalating trade tensions with the U.S.
Yesterday, the central bank-owned Financial News called for finding the right tempo in adjusting monetary policies.
The series of comments could further dampen expectations for an imminent cut in interest rates or in banks’ reserve requirement ratios.
While China still has room to loosen policy, “cutting rates or RRR at the appropriate time means choosing the right timing and strength, so as to make the best use of policy tools to cope with various uncertainties in the future,” the Shanghai Securities News said.
“China’s monetary policy needs to balance between supporting the economy and preventing risks, and is also constrained by Sino-US yield differentials as well as domestic banks’ interest margins.”
China cut both benchmark interest rates and the RRRs twice last year to bolster the struggling economy. The People’s Bank of China has not cut rates this year despite U.S. President Donald Trump raising tariffs on Chinese goods, putting pressure on an economy mired in deflation and weak consumption.
Policy easing, including the use of structural tools, is not just about cutting interest rates or RRRs, the Financial News said in its Friday editorial, adding that monetary easing does not necessarily translate to credit easing, as financial stimulus alone does not lead to a sustainable boom in consumption.
Investors are “giving up on further monetary easing,” wrote Zichun Huang, China economist at Capital Economics, citing recent rises in bond yields.
Since China’s slew of stimulus measures, Huang wrote, “there have been no policy rate reductions… and the monetary targets set at the National People’s Congress suggested if anything that policy this year will be even less expensive than in 2024.”
Last month, China’s central bank said on Thursday it would adjust its monetary policy at the appropriate time to support the economy, amid rising external headwinds.
“Currently, the adverse effects caused by changes in the external environment have deepened, and challenges such as insufficient domestic demand and numerous potential risks still exist,” the People’s Bank of China said in its fourth-quarter monetary policy implementation report.
The central bank added it would make comprehensive use of its monetary policy toolkit, including interest rates and its bank reserve requirement ratio, and “adjust the intensity and pace of policy measures based on domestic and international economic and financial conditions.”
It said it would keep liquidity ample, promote a reasonable rebound in prices and keep the yuan exchange rate basically stable at a “reasonable and balanced” level.
Chinese policymakers have rolled out a blitz of stimulus measures since September, including interest rate cuts, cash injections and steps to tackle hidden debt of local governments. They have promised to unveil more steps this year to support the economy.
Faced with deflationary pressures and mounting headwinds to already stuttering growth, Chinese leaders in December ditched their 14-year-old “prudent” monetary policy stance for a “moderately loose” posture. (Int’l News Desk)
