By Kevin Yao and Joe Cash
BEIJING (Reuters) -Chinese officials on Thursday flagged more monetary policy easing “at an appropriate time” and left the door open to more stimulus measures on top of those announced at this week’s annual parliament meeting if economic growth veered off track.
Finance Minister Lan Foan, central bank governor Pan Gongsheng, and other officials spoke to the media a day after Premier Li Qiang told lawmakers Beijing aimed to keep the tariff-hit economy growing at a roughly 5% rate this year.
Pan reiterated his stance that the People’s Bank of China (PBOC) will cut interest rates and inject liquidity into the financial system through cuts to the amount banks are required to hold as reserves “at an appropriate time.”
Faced with deflationary pressures and anticipating mounting trade tensions, China’s top leaders in December ditched their 14-year-old “prudent” monetary policy stance for a “moderately loose” one.
Since then, U.S.
President Donald Trump has raised tariffs on China, threatening its sprawling industrial complex, at a time when persistently sluggish household demand and the unravelling of the debt-laden property sector are making the economy increasingly vulnerable.
However, the PBOC is yet to cut interest rates or reserve requirement ratios (RRR) – moves that it said in September 2024 it was looking to implement by year-end.
The key obstacle for further easing has been the need to maintain the yuan currency stable against the dollar, which is also one of the PBOC’s stated goals.
Preventing further weakening would show goodwill to Trump in the build-up to any negotiations on a trade deal that would put a ceiling on tariffs, analysts say.
Trump had expressed dissatisfaction with what he described as China and Japan “reducing” their currencies.
A weaker currency makes a country’s exports more competitive while imports more expensive and Trump has said U.S. trading partners should not be using the mechanism to their advantage.
Without referencing Trump’s comments, Pan on Thursday repeated that the PBOC wanted to maintain currency stability at “a reasonable and balanced level.”
Pan also repeated language from Li’s work report that officials were looking to introduce new monetary policy tools that would focus on supporting investment and financing in scientific and technological innovation, promoting consumption and stabilising foreign trade.
A re-lending facility for the technology sector will be expanded to up to 1 trillion yuan ($138 billion) from 500 billion, Pan said.
Next to Pan, finance minister Lan gave remarks that left the door open to more stimulus measures if the higher budget deficit and debt issuance plans announced on Wednesday would be deemed in the future insufficient.
“To cope with possible external and domestic uncertainties, the central government has also set aside ample reserve tools and policy space,” said Lan.
Also at the conference, China’s state planner Zheng Shanjie said he was confident about reaching the target despite mounting external uncertainties and insufficient domestic demand.
The country will launch major projects in key sectors such as railways, nuclear power, water conservancy, and other key industries, aiming to attract private investment, Zheng said.
($1 = 7.2423 Chinese yuan)
(Writing by Liangping Gao and Marius Zaharia; Editing by Shri Navaratnam and Tomasz Janowski)
