People’s Bank of China (PBOC) Governor Yi Gang said the central bank will focus on five measures to support credit provision to the real economy, following the government’s announcement of more “direct” support in its annual
policy blueprint released last week.
In the near future officials plan to roll out more measures to enable small firms to delay repayment of loans and interest, increase collateral-free credit to small companies, improve the government’s associated credit guarantees, support corporate bond sales and develop supply-chain finance, Yi said in a local-media interview according to a statement published on the PBOC’s website.
Yi didn’t specify if the monetary authority would roll out new instruments to deal with the impact of the pandemic, but signalled that the current targeted, moderate approach to stimulus would continue.
China’s measures to contain the spread of the virus and restart the economy are a “major strategic achievement”, with production and people’s lives going back to normal, Yi said. Even faced with global turmoil, the improving momentum of the domestic economy won’t change, he said.
Yi also said targeted monetary measures to ensure sufficient liquidity, lower borrowing costs and provide cheap credit have worked well, and the PBOC plans to make its policy more precise and targeted in the future.
The government’s restrained approach to stimulus has disappointed some investors, though it does leave room for policy to be adjusted if the outlook worsens. Some economists warned the economy could fall into a technical recession this quarter. Top leaders have abandoned a hard growth target for 2020, focusing instead on employment stability and poverty alleviation.
Talking about risks, Yi said global economic fundamentals face severe challenges, and the global economic downturn “will very likely be worse than the global financial crisis in 2008 and even the Great Recession.”
Domestically, the economic shocks caused by the pandemic are weighing on the quality of bank assets, Yi said, calling for attention to small financial institutions especially. Banks will likely face increasing pressure from non-performing loans, and the PBOC will support them to replenish capital, he said.
On the PBOC’s digital currency plan, Yi said there’s still “no timetable” on a formal launch yet, and its current
trials in some cities are part of “routine research and development.”