MNI INTERVIEW 2: PBOC Should Cut Benchmark Rates: Counsellor

--More Flexible Monetary Policy in 2020

--PBOC May Soon Cut Deposit Rate

--Second Of 2-Part Interview With Tang Min

     BEIJING (MNI) - The People's Bank of China should consider further cutting

benchmark rates including the deposit rate and take targeted measures to extend

credit to struggling small businesses if economic situation further

deteriorates, an advisor to the State Council told MNI.

     Rate cuts, particularly in the deposit rate, which has not changed since

2015, may further motivate banks to expand credit as production and consumption

recover, Tang Min, an economist in Premier Li Keqiang's cabinet said in an

interview, stressing that he was expressing his personal opinion. He

acknowledged that the efficacy of a lower deposit rate may be limited, as wealth

management products offering higher rates have attracted a growing portion of

the deposit market.

     "It is necessary and reasonable for monetary policies to show more of an

easing stance at this special time," Tang said, noting that President Xi Jinping

has called for monetary policy to be not only prudent but also flexible this

year. The PBOC will act promptly even though the eventual overall economic

impact of the virus remains uncertain, he said on Tuesday.

     China could also participate in future joint actions with other major

central banks to address the effects of what is now a fast-growing global

epidemic, although any measures would be in accordance with the needs of its

economy, Tang said. The PBOC has made a slew of policy moves including liquidity

injections and policy rate cuts in response to the epidemic, he said.

     --INFLATION NO CONSTRAINT

     While authorities should remain wary of easing so far as to inflate asset

price bubbles, such as in property or equity markets, inflation should not pose

a constraint, Tang said. The recent surge in consumer prices was largely a

function of the transient effects on pork supply of African swine fever and

China's excess industrial capacity continues to depress prices of many produced

goods.

     The PBOC may also look to setting lending requirements for banks to

encourage loans to smaller businesses, in addition to making macro-scale rate

cuts and liquidity injections, he said.

     Technology from firms such as Alibaba Group could facilitate instant and

low-cost loan approvals and closer tracking of credit ratings, helping to

overcome large banks' reluctance to lend to smaller companies, Tang suggested.

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

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