The People's Bank of China: Will continue to maintain a supportive monetary policy stance
On June 19, at the 2024 Lujiazui Forum, Pan Gongsheng, governor of the People's Bank of China, stated that he would continue to adhere to a supportive monetary policy stance, strengthen counter-cyclical and cross-cycle adjustments, effectively consolidate and enhance the upward trend of the economy, and create a good monetary and financial environment for economic and social development.
He introduced that since the beginning of this year, global inflation has cooled down from a high level, but it is still sticky. Some central banks, such as the European Central Bank, have begun to cut interest rates, and some central banks are still observing and expecting that they may also cut interest rates later this year, but generally they still maintain a high interest rate and restrictive monetary policy stance. The situation in China is different. The monetary policy stance is supportive, providing financial support for the continued recovery of the economy.
In terms of the total amount of monetary policy, the People's Bank of China has comprehensively used a variety of monetary policy tools, including lowering the deposit reserve ratio, lowering the policy interest rate, and driving down financial market interest rates such as the loan market quotation rate, etc., to create a good monetary and financial environment for high-quality economic development. At the end of May, the scale of social financing increased by 8.4% year-on-year, and M2 increased by 7% year-on-year, both higher than the nominal GDP growth rate. The interest rate for new loans in May was 3.67%, which was at a relatively low level.
In terms of the structure of monetary credit, the role of macro-prudential policies and structural monetary policy tools will be brought into play. Refinancing for technological innovation and technological transformation will be established to increase financial support for technological innovation and equipment upgrading and transformation. A combination of real estate support policies will be introduced, including reducing the minimum down payment ratio for personal housing loans, canceling the lower limit of personal housing loan interest rates, lowering the interest rate of provident fund loans, and establishing refinancing for affordable housing, so as to accelerate the destocking of existing commercial housing in a market-oriented manner. At present, the balance of structural monetary policy tools is about 7 trillion yuan, accounting for about 15% of the size of the People's Bank of China's balance sheet, focusing on supporting small and micro enterprises, green transformation and other key areas and weak links of the national economy.
In terms of monetary policy transmission, efforts are made to regulate market behavior, revitalize inefficient existing financial resources, improve the efficiency of fund use, and facilitate monetary policy transmission. Since the beginning of this year, the People's Bank of China has worked with the National Bureau of Statistics to optimize the quarterly financial industry value-added accounting method, changing from the previous method based on the growth rate of deposits and loans to the income method, which more truly reflects the level of financial industry value-added and weakens the "rush to time" behavior of deposits and loans by some local governments and financial institutions.
He said that in future regulation, we will focus on grasping and handling three aspects of the relationship: First, the relationship between the short-term and the long-term. Maintaining price stability and promoting a moderate price recovery will be an important consideration, and policy tools such as interest rates and deposit reserve ratios will be used flexibly, while maintaining policy focus and not expanding or contracting. Second, the relationship between stabilizing growth and preventing risks. We will coordinate and balance the relationship between supporting the growth of the real economy and maintaining the health of financial institutions themselves, and insist on preventing and resolving financial risks in promoting high-quality economic development. Third, the relationship between internal and external. We will mainly consider the need for regulation of the domestic economic and financial situation, taking into account the spillover effects of the economic and monetary policy cycles of other economies.
