MNI POLICY: No Need to Cut RRR Given Recovery: Ex-PBOC Advisor

     BEIJING (MNI) - China's economy saw a "good recovery" in the first quarter,

so policymakers should "wait and see" before further cutting the reserve

requirement ratios for banks and further loosening liquidity, Li Daokui, a

former member of the People's Bank of China monetary policy committee, told

reporters Thursday.  

     "The economy has basically stabilized," Li said on the sidelines of the

Belt and Road forum in Beijing. There needs to be continued policy dialogues

first, said Li without elaborating.  

     China also needs a more sustainable approach towards helping small and

medium-sized private enterprises (SMEs) obtain financing alternative to the

current situation, where banks have reportedly loaned to SMEs at a discount to

base rates under political pressure to carry out leadership directives. 

     "It shouldn't be done this way," said Li, who is now a scholar at the

Tsinghua University and a member of the CPPCC government advisory body. There

should be financial systemic innovations to ensure assistance for SMEs is

sustainable, Li said.

     Earlier Thursday, an official at the China Banking and Insurance Regulatory

Commission, when questioned by MNI, said he isn't aware that banks had loaned to

SMEs below base rates and such claims aren't supported by data. 

     However, he added that the regulator sees loan rates between 5-5.7% as more

reasonable if all risks are properly accounted for, and that lending at

below-market rates would only encourage arbitrage.

--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

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

[TOPICS: MMQPB$,M$A$$$,M$Q$$$,MBQ$$$,MGQ$$$]