BEIJING (Reuters) – China’s central bank said on Thursday it will maintain support for the slowing economy as global risks rise, while vowing not to adopt “flood-like” stimulus that analysts say could exacerbate debt and structural risks.
Recent downbeat Chinese data has fanned market expectations that the government may roll out fresh stimulus to prevent a sharper slowdown in the world’s second-largest economy amid a bruising trade war with the United States.
“The international economic and financial situation is complex and the external uncertainties and unstable factors are increasing,” the People’s Bank of China said in a statement following a quarterly meeting of its monetary policy committee.
“We should innovate and improve macro-economic adjustments, implement counter-cyclical measures in a timely and appropriate manner, and strengthen macro-policy coordination,” it said.
The central bank said it will use a variety of monetary policy tools to keep liquidity reasonably ample, under a prudent monetary policy that’s neither too tight nor too loose.
The PBOC has been trying to ease credit conditions by cutting the reserve requirement ratio (RRR) for lenders six times since early 2018, and further reductions are widely expected.
The central bank reiterated its goal of deepening market-based interest rate reforms and keeping the yuan <CNY=CFXS> basically stable, and said that it will not resort to “flood-like” stimulus even though China’s debt-to-GDP ratio has showed signs of steadying.
Policy insiders said they don’t expect the central bank to not cut benchmark interest rates any time soon.
The PBOC will take steps to defuse financial risks but it will control the pace of its de-risking drive, it added.
Beijing has taken steps in recent months to support an economy pinched by a tit-for-tat tariff war with the United States. Economic growth slowed to a 28-year low of 6.6 percent in 2018 and further cooling is expected this year.
(Reporting by Beijing Monitoring Desk and Kevin Yao; Editing by Richard Borsuk)