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BEIJING (MNI) - China needs loose monetary conditions to revive its slowing
economy, though the extent of the loosening may be limited by factors including
the need to protect the currency, Yi Gang, governor of the People's Bank of
China, said at a forum in Beijing on Thursday.
China's current account surplus this year may only be 0.1-0.2% of the GDP,
Yi said. It needs to increase the flexibility of the yuan to deal with internal
and external risks confronting the economy, Yi said.
Shadow banking, unusual volatilities of the market, external impact and
credit risks of key industries are considered "major risks," Yi said.
China's macro leverage has been stable since last year at about 250% of the
economy, Yi said. However, Yi warned against risks that external impact on
monetary policies may spread into debt, FX and stock markets. A strong dollar
and trade frictions caused pressure on the yuan, Yi said.
In formulating policies, China needs to consider the following four
aspects: keeping prudent and neutral monetary policy with proactive and fine
adjustments, coordination of policies that moderate the expansion and
contraction of credit, utilizing multiple sources to channel funding to private
and small businesses, deepening financial reform and "smoothening the
transmission mechanism of monetary policies," Yi said.
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