MNI China Press Digest Jan 5:  PBOC, SAFE, Targeted Lending

Highlights from Chinese press reports on Thursday:

• The PBOC will ensure monetary policy is sound, accurate and effective in 2023, following five years of unusual and extraordinary circumstances, according to a recent report posted on the central banks’ social media account. The PBOC said it will use a variety of monetary policy tools to maintain reasonable and sufficient liquidity, keeping money supply and social financing in line with nominal economic growth. Multiple measures will be made to reduce the financing costs for firms, and the yuan exchange rate will be kept stable. Efforts will be made to develop the international use of the yuan, the PBOC said.
• China will further reform and open up its foreign exchange sector, according to an article posted on the State Administration of Foreign Exchange (SAFE) social media account. Setting out its plans for 2023, SAFE said it would reform the FX sector to better serve the real economy, maintain stable operation of currency exchange, and would continue stabilising China's foreign exchange reserves. Support would be given to SME’s to optimise FX services and hedge risk, and make better use of cross-border financial service platforms. It was also noted that in 2022 the balance of payments and currency exchange markets had shown resilience and stability.
• China’s central bank is expected to expand Pledged Supplementary Lending (PSL) in 2023 as it constitutes the "precise and powerful" monetary policy called for by the Central Economic Work Conference, according to the Securities Daily. Given local government debt and pressure on commercial banks net interest margins, policy banks will play an important role in 2023, and the scale of PSL may increase, according to experts cited by the paper. The PSL has helped policy banks support projects in real estate and new infrastructure. The paper said the targeted lending tool supports weak links in the economy, and can effectively guide long-term interest rates down.