Indicates Change in China's Monetary Policy... People's Bank Removes 'Strengthening Macroeconomic Policy' Phrase

No Stringent Monetary Measures Expected Due to Victory Over COVID-19
Path to Economic Normalization, Monetary Policy Easing Including Tightening

[Asia Economy Beijing=Special Correspondent Jo Young-shin] The People's Bank of China, the central bank of China, removed the phrase "strengthening the intensity of macro policy adjustment," which had been continuously used since the COVID-19 outbreak, from the statement released after the quarterly monetary policy committee meeting.

In China, this has been interpreted as the People's Bank of China gradually seeking normalization of monetary policy amid the rapid normalization of the Chinese economy based on the success in curbing the spread of COVID-19.

According to the China Securities Journal on the 29th, the phrase "strengthening the capacity for macro policy adjustment," which had been included until the previous quarter, was omitted from the statement of the third-quarter monetary policy committee released by the People's Bank of China the day before.

The China Securities Journal pointed out, "This explains that as the impact of COVID-19 on the current economy gradually disappears, the authorities will no longer implement high-intensity response measures," adding, "The authorities want to avoid interest rate games and misallocation of resources by utilizing policy-based low-interest support funds."

[Image source=Yonhap News]

In China, there is speculation that the People's Bank of China will continue to maintain the current "moderate monetary policy" stance and will not rapidly shift monetary policy toward a de facto tightening direction.

In the statement released the day before, the People's Bank of China said, "We will implement a more flexible moderate monetary policy," adding, "We will comprehensively operate various monetary policy tools and introduce new monetary policy tools to reasonably meet liquidity needs." It also added, "By clearly lowering the comprehensive loan cost, we will induce loan interest rates to continue to decline."

The China Securities Journal stated, "Going forward, the People's Bank of China's monetary policy will be flexibly determined according to the actual development of the economic situation," and "structural tightening and easing can coexist."

Since the beginning of the year, the People's Bank of China has repeatedly cut policy interest rates and reserve requirement ratios while supplying large-scale low-interest loans, significantly expanding liquidity supply.

China's economic growth rates for the first and second quarters of this year recorded -6.8% and 3.2%, respectively, compared to the same period last year, showing a clear V-shaped economic rebound.

While the IMF predicted the global economic growth rate to be -4.9% this year, China is the only major country expected to achieve a positive growth rate of 1.0%.