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PBOC’s stand signals tight liquidity
Print Edition
Liquidity is likely to stay relatively tight at least in the first half of the year after the Chinese central bank issued an “unusually hawkish” monetary report at the weekend, according to analysts.
“The People’s Bank of China highlighted plans to focus on controlling financial risks, in particular from wealth management products and local government debt,” Dariusz Kowalczyk, senior economist at Credit Agricole Corporate and Investment Bank, said in a report yesterday.
He said the PBOC’s quarterly monetary policy report, issued on Saturday, was unusually hawkish in suggesting that the high money market rate volatility will remain.
“They seem determined to conduct tighter liquidity policy until banks slow their expansion of credit,” Kowalczyk pointed out.
In its monetary policy report the PBOC said that money market rates, or the cost of liquidity, will reflect a tamer “valve of liquidity” and the market needs to “tolerate reasonable rate changes” so that resources can be allocated more efficiently.
The PBOC reiterated that it will continue with a prudent monetary stance and take measures to maintain appropriate liquidity to support reasonable growth in credit and social financing.
Wang Guobing, an analyst at Northeast Securities Co, said the effects of fine-tuned measures will only be seen in the second half of the year.
“The government will put more weight on maintaining stable growth,” Wang said.
China’s purchasing managers’ index for the manufacturing sector fell to a five-month low of 50.5 percent in January, official data showed.
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