(Bloomberg) — China must avoid massive stimulus, keep debt levels sustainable and maintain a prudent monetary policy stance, central bank Governor Yi Gang said at a press briefing in Beijing,.
Overall financial risks are contained and risks in the shadow banking sector and some key institutions have been resolved, said Yi, reiterating the central bank’s policy stance at a joint briefing in Beijing with Finance Minister Liu Kun and National Bureau of Statistics head Ning Jizhe.
Interest rates are appropriate and the central bank has ample monetary policy tools, the central bank said in a statement ahead of the briefing.
China is grappling with growth on pace for the slowest expansion in almost thirty years with industrial production in August rising at the slowest single month pace since 2002, exports unexpectedly contracting and a producer prices index falling deeper into deflation. That’s adding pressure on policy makers to do more to support the economy amid the risk of yet-higher tariffs in the trade war with the U.S. and slowing global growth.
The PBOC cut the amount of cash banks must hold as reserves this month to the lowest level since 2007, though it’s still holding off on cutting borrowing costs more broadly. Analysts are calling for stronger easing signals after a new gauge of borrowing costs was only slightly lowered on Friday.
The one-year reference rate for bank loans was set Friday at 4.2% for September versus 4.25% in August. While the PBOC has tweaked policies in recent months to support the slowdown, it has refrained from more aggressive stimulus out of concern over financial stability and high debt levels.
That’s a contrast to other global central banks, including the Federal Reserve and the European Central Bank, which are either cutting borrowing costs further or flagging a willingness to do so.
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