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The People's Bank of China should avoid monetising the fiscal deficit but support fiscal policy to promote employment, industry development, consumption and environmental protection, wrote Sun Guofeng, the head of the PBOC's Monetary Policy Department.

The primary goal of monetary policy should be to stabilise the value of the yuan but the central bank will pay more attention to employment, Sun wrote in an article published on the PBOC's social media account. He added that the rates of the medium-term lending facility have become the medium-term policy rate while those of open market operations have become the short-term policy rate.

The PBOC will keep China's M2 and total social financing growth relatively on par with China's potential economic growth since pegging them to the high real GDP growth of the past will give rise to over-easing and over-leveraging, Sun said.

MNI Singapore Bureau | +65 9 632 1991 |
MNI Singapore Bureau | +65 9 632 1991 |
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