China central bank to keep appropriate liquidity, stable yuan

China central bank to keep appropriate liquidity, stable yuan
A customer counts Chinese Yuan banknotes at a market in Beijing. (Reuters)
Updated 04 July 2016

China central bank to keep appropriate liquidity, stable yuan

China central bank to keep appropriate liquidity, stable yuan

BEIJING: China’s central bank said it would use various policy tools to maintain appropriate liquidity and reasonable growth in credit and social financing.
The People’s Bank of China said it would continue to implement a prudent monetary policy and keep its stance “neither too loose nor too tight.” The central bank said this in a statement after the second-quarter monetary policy committee meeting.
“We will improve and optimize the financing and credit structures, increase the proportion of direct financing and reduce social financing costs,” it said.
China’s economic performance remained generally stable, but “the complexity of the economic situation cannot be underestimated,” the central bank said.
It said major economies had become more divergent. Recovery in the US is modest, recovery in Europe has yet to be consolidated, the Japanese economy is sluggish and emerging economies face more difficulties.
The central bank also reaffirmed that it would keep the yuan basically stable while pushing forward reforms to improve its currency regime.
A flurry of data from China in coming weeks is expected to show continued weakness in trade and investment, sluggish industrial output and another drop in foreign reserves, reinforcing views that Beijing will roll out more economic support measures soon.
A flurry of data from China in coming weeks is expected to show continued weakness in trade and investment, sluggish industrial output and another drop in foreign reserves, reinforcing views that Beijing will roll out more economic support measures soon.
Weak factory surveys and heightened economic uncertainty following Britain’s vote to leave the European Union have added to views that authorities will ramp up fiscal stimulus and ease monetary policy by cutting interest rates and banks’ reserve requirements in coming months.
Reuters reported on Thursday that the People’s Bank of China (PBOC) also would tolerate a fall in the yuan to as low as 6.8 per dollar in 2016 to support the economy, if it did not trigger a backlash from major trading partners.
Economists polled by Reuters expected June exports fell 4.1 percent, the same rate as in May, while imports likely dropped 5 percent, renewing their decline after only a marginal drop in May raised hopes that domestic demand was reviving.

China’s trade surplus is forecast to hit $46.6 billion in June, from around $50 billion in May.
The consumer inflation rate may have dipped slightly to 1.8 percent in June, which would be a five-month low, while producer deflation may show further signs of moderating, easing strains on companies’ profit margins.
Factory-gate prices are expected to have declined 2.5 percent, which would be the slowest decline since October 2014.