PBOC will keep liquidity ample, support recovery without excessive stimulus

[BEIJING] The People's Bank of China (PBOC) will keep liquidity reasonably ample, and support for an economic recovery in 2021 will be maintained, without resorting to a flood-like stimulus, a central banker wrote in magazine article seen on Wednesday.

Interest rates would be held at an appropriate level, while liquidity would be managed using tools like the reserve requirement ratio (RRR), re-lending, the medium-term lending facility, and open market operations, according to Sun Guofeng, the head of the monetary policy department.

"In 2021, situation at home and abroad is still very complex, and monetary policy is facing many challenges," Mr Sun wrote in China Finance, a magazine run by the PBOC.

Policy would remain flexible, adjusting intensity, pace and focus according to the economy's needs, Mr Sun said.

China's short-term money rates eased to two-week lows on Tuesday as signs of liquidity tension in the interbank money markets started to fade, traders said.

Short-term funding costs started rising last week as the central bank refrained from making its usual substantial liquidity injections to meet high demand for cash ahead of the week-long Lunar New Year holidays, which starts on Feb 11 this year.

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The central bank will steadily adjust emergency policies unveiled during the height of the coronavirus outbreak last year, and allocate more financial resources to key areas and weak links of economic and social development, Sun said.

The PBOC will push forward with reforms of money market benchmark interest rates, and will deepen loan prime rate (LPR) reforms to make deposit rates more market-driven, he added.

Last week, PBOC Governor Yi Gang said the central bank would be watching debt and non-performing loan risks, while monetary policy would continue to support economic growth.

REUTERS