MNI China Press Digest May 5:Monetary Policy, FX, Real-economy

Highlights from Chinese press reports on Monday:

• The People’s Bank of China (PBOC) should use more targeted policies to support the private sector, according to Liu Yuanchun, president at Shanghai University of Finance and Economics. At a recent forum, Liu noted current monetary policy was heavily distorted in favour of state owned and large companies in Q1, with policy interest rates at about 3%, state owned company rates near 1.8% and private firms charged 6-10%. Liu said the PBOC needs to address the imbalance with more targeted measures to help SME firms recover and restore confidence. The government should address weak CPI growth, which will hurt company profits by speeding up urbanisation and increasing affordable housing. (Source: Yicai)
• China’s foreign exchange reserves will remain stable as the economy rebounds, according to the State Administration of Foreign Exchange. The country’s FX reserves have increased for seven consecutive months, as implemented policies stabilised exports and attracted foreign capital into domestic financial markets. Looking forward, reserves will be resilient as international investors increase exposure in China and yuan assets become more attractive. The Peoples’ Bank of China has also increased its gold holdings in recent months to optimise its international reserves risk profile, one expert said. (Source: Securities Daily)
• China will prioritise the development of a modern industrial system to become a modern country, the 20th Central Committee of Finance and Economics recently said. The government will focus on the real economy, nurturing entrepreneurs and supporting new technologies. An expert said the meeting highlighted the importance of manufacturing and securing industrial supply chains, as China navigates geo-political tensions. Another expert expected fiscal, monetary and industrial policy will support advanced manufacturing industries through tax reductions, and beneficial loan terms. (Source: Yicai)