MNI POLICY: Ample Tools to Manage External Uncertainties: PBOC

     BEIJING (MNI) - The People's Bank of China (PBOC) has ample tools to deal

with  external and domestic uncertainties and will continue with structural

measures to support private small businesses and stabilize economy, officials

told reporters during a briefing Friday after Washington imposed higher tariff

against Chinese exports. Here are some of the main takeaways:

     - The trade conflict with the U.S. has weighed on sentiment more than the

real economy, and China has confidence that its economy will be stabilized, as

supported by major indicators, including Q1 GDP, inflation and money supply,

said Zhou Xuedong, spokesman and director of the general executive office of the

PBOC. 

     - The central bank will control the money supply floodgate, maintain a

prudent stance, pre-set and finetune policies according to economic and price

situations, said Sun Guofeng, the head of monetary policy department of the

PBOC. The central bank will make good use of structural tools, including

targeted medium-term lending facility and rediscounting, to guide financial

institutions to support the economy, particularly private small businesses, said

Sun.

     - Credit will remain robust and steady in the future as the PBOC has taken

measures to relax restrictions on  lenders over liquidity, capital and interest

rates, so as to encourage credit expansion, Sun said, noting credit demand is

strong following supply-side reform and economic upgrade. The central bank will

remain a neither-too-loose-nor-too-easy stance, he repeated.

     - The latest targeted RRR cut was an important move toward financial

reform, Sun said. The central bank will conduct the cut in three separate steps

to prevent liquidity getting stuck in the financial system and extend long-term

funds to small businesses, said Sun. At present, the RRR system has basically

formed a "three brackets" framework, namely 13.5% for big banks, 11.5% for

medium-size banks and 8% for small banks. There are also two levels of reward

polices, Sun said.

     - The expansion of aggregate financing to the economy and M2 last month was

appropriate, said Zhang Wenhong, deputy director of the central bank's surveys

and statistics department. The slower expansion rate of aggregate financing to

the economy in April though was due to seasonal reasons and fast expansion of

loans in March, Zhang said. 

     - The central bank will watch closely changes in the property market and

strive for policy continuity this year, said Zou Lan, deputy head of the PBOC's

financial markets department. Financial regulations over the property market

haven't changed, Zou stressed.

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

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

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