International Finance

With global risks on the rise, China’s apex bank to support economy

China's central bank to support economy
The Chinese central bank also confirmed the use of a new instrument termed as a medium-term lending facility

With a slowing economy and global risks on the rise, China’s central bank pledged its support to the economy. However, it will not adapt to ‘flood-like’ stimulus which could lead to creation of more debt and structural risk, Reuters reported.

Amid the ongoing trade war with the US, recent speculations suggested that the central bank would use certain stimulus to prevent a further slowdown of the Chinese economy.

The People’s Bank of China confirmed another media speculation about the use of a new instrument termed as a medium-term lending facility for liquidity injection worth ¥769.5 billion in the last two months.

“The downward pressures and China’s potential exposure to global risks in may increase somewhat over a certain period of time during the course of economic restructuring,” the central bank said in its third-quarter monetary policy report.

The central bank said it will promote steady economic growth and also keep liquidity on the check.

The bank also pledged to make changes in policies, use various monetary tools to adjust liquidity, and promote growth in credit and social financing.

Louis Kuijs, the chief China economist at Royal Bank of Scotland told the South China Morning Post that, “Monetary policy will continue to be supportive of growth, however, as long as growth does not fall much further from the rates seen now, I expect the PBOC to abstain from general, high-profile measures.”

The recent collapse of the Baoshang Bank has also put pressure on the central bank. As a response, the central bank pumped around ¥ 600 billion into the system.

Economic growth slowed to a 28-year low of 6.6 percent in 2018.

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