China to Maintain ‘Normal’ Monetary Policy, PBOC Governor Says

Yi Gang

Photographer: Qilai Shen/Bloomberg

China will maintain “normal” monetary policy for as long as possible, according to the People’s Bank of China Governor Yi Gang.

Policy makers plan to encourage a “reasonable” increase in household savings and incomes, Yi wrote in an article published Saturday in the central bank’s biweekly magazine China Finance. The country will also make sure its liquidity stays somewhat ample, and will facilitate reasonable growth of money supply and social financing, while avoiding excess liquidity flooding the economy in order to reduce fluctuations, he said.

Most of the world’s major economies have rolled out fiscal and monetary measures to counter the effects of the coronavirus pandemic. Yi cautioned that excessive stimulus could lead to debt expansion and create asset bubbles that will increase longer-term systemic risks.

The governor also said financial institutions and their shareholders, local governments and regulators should take prime responsibility in dealing with financial risks. Once major risk events occur, shareholders at the respective financial institutions should assume the losses, and insolvent institutions should exit the market according to law, he said.

The central bank said last month it will make monetary policy more precise and targeted after the quarterly policy meeting. The PBOC called on banks to make full use of structured monetary tools to increase the “directness” of its policies and vowed to achieve a long-term balance between stabilizing growth and preventing risks.

— With assistance by Sharon Chen, and Jing Li

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