Premier Li Keqiang responded to the doubt that recently issued monetary policies are intended to push forward quantitative easing, reiterating that China will maintain a prudent monetary policy, speaking at the State Council executive meeting on Feb 20.
At the beginning of 2019, the People’s Bank of China announced that the reserve requirement ratio (RRR) for financial institutions would be cut by one percentage point in January, and that the medium-term lending facility (MLF) would not continue when it expires in the first quarter of 2019.
According to Premier Li, reducing RRR twice in a month complies with market entities, and takes into account the fact that China’s RRR is higher than that of any other major economies in the world. In the process of decreasing RRR, liquidity is soaked up properly as well.
Related financial institutions should work together to channel more loans into the real economy as well as micro, small and medium-sized enterprises, and efforts should be intensified to promote medium and long-term loans to ensure the macro economy operates stably and performs well in the long term, he said.
He also said bill financing and short-term loans are found to grow fast after releasing the signal of cutting RRR, which may not only lead to interest arbitrage and idle capital, but also cause new potential risks.
The Premier asked related departments to analyze the changes in loans to the real economy and micro, small and medium-sized enterprises this year to find problems and take targeted measures.