MNI POLICY: 'Policy Toolbox' Can Aid Virus-hit Economy: PBOC

     BEIJING (MNI) - The People's Bank of China will prioritise growth over

other monetary policy targets as the coronavirus adds to the challenges facing

an already slowing economy, Vice Governor Pan Gongsheng told reporters Friday,

stressing the central bank has a "very sufficient toolbox".

     "In implementing monetary policies, we should consider the multiple factors

of internal and external balance, such as economic growth, leverage, inflation

expectations and exchange rate," Pan said. "Given the context of the coronavirus

outbreak and the downward pressure on the economy, it is even more important to

maintain economic growth," he said.

     The PBOC will increase countercyclical measures, add sufficient liquidity

and use monetary tools including targeted reserve requirement ratio cuts to

shore up growth, Pan said.

     Other key points from the briefing by Pan, Vice Minister of Finance Yu

Weiping and Zhou Liang, a vice chairman of the China Banking and Insurance

Regulatory Commission (CBIRC).

     -- Financial markets have a "relatively high probability" that the loan

prime rate, to be announced on Feb. 20, will fall given lower interest rates in

both financial and money markets, said Pan.

     -- The central bank will strike a balance between pro-growth and

stabilizing leverage, Pan said, noting China's macro-leverage ratio has remained

basically stable at about 250% in the past ten quarters, Pan said. The economy

will quickly stabilize when the epidemic eases, and resumed consumption and

investment will contribute to a recovery, he said.

     -- The PBOC has set CNY300 billion in special relending at lower than

3.15%, compared with the latest LPR at 4.15%, to support companies fighting the

virus outbreak, Pan said. 

     - Non-performing loans for small and micro companies will rise amid the

epidemic, though the impact is temporary, said Zhou of CBIRC. The regulator will

increase the tolerance of the NPL for SMEs. With banks having 180% provision

coverage, a rise in NPLs of small businesses can be dealt with. The NPL ratio of

small companies was 3.22% in 2019.

     - Regulators may delay the implementation of new regulations on asset

managers accordingly, said Pan.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@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

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