China plans to roll out more measures to stabilize growth amid downward pressure but will not resort to a massive stimulus package, according to senior officials with the nation’s top financial regulators.
Zhu Hexin, deputy governor of the People’s Bank of China, the central bank, said the government will make a dynamic assessment of the current monetary policy, while making good use of existing tools to channel funds to the non-financial sector.
“Maintaining a prudent monetary policy does not mean there will be no changes. We will make the policy more forward-looking, flexible and targeted in response to changes,” he said, fending off the likelihood of adopting stimulus measures in response to concerns about whether the central bank intends to cut the benchmark interest rates.
The PBOC has cut the amount of money banks have to hold as reserves five times in a year, but has yet to cut the benchmark interest rates. The benchmark interest rate in China was last recorded at 4.35 percent. It was last cut by 25 basis points in October 2015.
While keeping the benchmark rate unchanged, the bank has introduced new tools to pump money into the economy, such as the medium-term lending facility.
China has injected 16.17 trillion yuan ($2.39 trillion) in new yuan loans in the past year to stabilize growth. There is room to improve the monetary transmission mechanism to spur lending to smaller firms, Zhu said.
Some large commercial banks have lowered rates in particular to support funding for small and medium-sized enterprises. Rates for SME borrowers have been reduced from around 7 percent in the first half in 2018 to 5.8 percent at the year end, according to a manager with China Construction Bank.
In the meantime, other supportive measures to bolster growth are expected to come out soon, including efforts to streamline procedures for bond issuance and tax cut measures.
The Ministry of Finance will make more efforts to promote fiscal policy on cutting taxes and fees, according to Xu Hongcai, assistant minister of finance. Local government special bond issuance is expected to finish by the end of September, he said.