The People’s Bank of China provided a more positive outlook of the economy, saying that it is showing more stability and improvement, even though domestic and global risks remain.
The central bank is to step up its coordination with global economic policies and prevent “external shocks,” the bank’s monetary policy committee said in a statement on Monday at the conclusion of its quarterly meeting.
The committee reiterated that China’s prudent monetary policy will be targeted and reasonable, while the central bank will keep liquidity reasonably ample.
After record economic expansion in the first quarter, recent indicators show that growth is stabilizing and showing more balance.
The bank has kept its policy stance unchanged this year, taking a gradual approach to curbing credit growth to tackle financial risks, while providing enough liquidity to the market to meet demand.
The statement indicates that the committee has a more positive view on the economy than in the first quarter, when it said the recovery was “still unbalanced,” Citic Securities Co (中信證券) analysts led by Ming Ming (明明) wrote in a note yesterday.
The bank will probably keep monetary policy stable and is unlikely to loosen policy significantly going forward, the analysts said.
The central bank kept the rest of the language in the statement largely unchanged.
It reiterated that the macro-leverage ratio, or total debt as a proportion of GDP, will be kept stable, and vowed to match the expansion of money supply and aggregate financing with the nominal GDP growth rate.
The bank also said that it will boost exchange rate flexibility and keep the yuan stable at a reasonable, equilibrium level.
Huachuang Securities Co (華創證券) analysts including Zhou Guannan (周冠南) said that the mention of “external shocks” shows that the bank is paying more attention to the overseas policy environment amid growing signals that the US Federal Reserve might start to roll back its COVID-19 pandemic stimulus in the second half of this year.
The Chinese central bank is prepared to deal with the impact of the Fed’s potential tightening, because it has already started to normalize its policy, the Huachuang Securities analysts said in a note yesterday.
Separately, the World Bank raised its forecast of China’s economic growth this year to 8.5 percent from 8.1 percent and said that a full recovery requires progress in vaccinations against the virus.
Chinese economic growth is likely to decline to 5.4 percent next year as the rebound from last year’s slump fades and activity returns to normal, the World Bank said.
China is on track to vaccinate 40 percent of its population by early summer, but “a full recovery will also require continued progress toward achieving wide-spread immunization,” the World Bank said.
Additional reporting by AP
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