China central bank to maintain prudent policy to prevent inflation from spreading

China’s economic growth for the third quarter tumbled to its slowest pace in nearly three decades, under pressure from slowing global demand and the ongoing US-China trade war. (Reuters)
Updated 17 November 2019

China central bank to maintain prudent policy to prevent inflation from spreading

BEIJING: China’s central bank said on Saturday it will maintain prudent monetary policy to prevent inflation from spreading.

In its third quarter monetary policy report, the People’s Bank of China (PBoC) also said it was studying plans to switch the benchmark rate for existing loans to the new loan prime rate (LPR).

China’s economic growth for the third quarter tumbled to its slowest pace in nearly three decades, under pressure from slowing global demand and the ongoing trade war between China and the US.

At the same time, China’s consumer inflation has quickened to a near eight-year high of 3.8 percent, driven in part by soaring pork prices as a result of an outbreak of African Swine Fever in the country, posing a dilemma for the central bank.

“The PBoC is increasingly concerned about rising CPI inflation and inflation expectations,” economists at Nomura said in a note, saying those risks may incline policymakers to lower profile-easing measures in the near term.

The PBoC had unexpectedly made a 200 billion yuan ($28.60 billion) liquidity injection earlier in the day.

Despite the higher inflation rates the central bank is expected to lower the LPR next Wednesday, for the third time since it was introduced in August.

The introduction of the LPR — a lending benchmark for new bank loans to households and businesses — is part of a broader packet of reforms the central bank is exploring to reduce corporate borrowing costs in the world’s second-largest economy.

In Saturday’s report, the PBoC reiterated that it would continue to significantly lower real interest rates through reforms.

It said the weighted average lending rate fell 4 basis points in the third quarter to 5.62 percent.

China's central bank also said that it would strengthen counter-cyclical adjustments in light of the rising downward pressure on the economy. 


Trump calls for World Bank to stop lending to China

Updated 07 December 2019

Trump calls for World Bank to stop lending to China

WASHINGTON: US President Donald Trump on Friday called for the World Bank to stop giving loans to China, one day after the institution adopted a lending plan to Beijing over Washington’s objections.
The World Bank on Thursday adopted a plan to aid China with $1 billion to $1.5 billion in low-interest loans annually through June 2025. The plan calls for lending to “gradually decline” from the previous five-year average of $1.8 billion.
“Why is the World Bank loaning money to China? Can this be possible? China has plenty of money, and if they don’t, they create it. STOP!” Trump wrote in a post on Twitter.
Spokespeople for the White House and the World Bank did not immediately respond to requests for comment.
The World Bank loaned China $1.3 billion in the fiscal 2019 year, which ended on June 30, a decrease from around $2.4 billion in fiscal 2017.
But the fall in the World Bank’s loans to China is not swift enough for the Trump administration, which has argued that Beijing is too wealthy for international aid.