Friday, March 13, 2015

CHINA MONETARY POLICY


China sticks to `prudent' policy

Friday, March 13, 2015

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China's central bank governor yesterday signaled that Beijing is comfortable with the current macroeconomic environment and plans to stick with its "prudent" monetary policy.
Zhou Xiaochuan also gave a suggested implementation timeline, for the first time, for introduction of deposit insurance and the full liberalization of deposit rates.The People's Bank of China governor said a long-awaited deposit insurance system would be rolled out in the first half and caps on bank deposit rates would very likely be removed this year.Zhou and his deputy governor Yi Gang reiterated that they were not overly concerned by capital outflows chasing higher returns on US dollar assets, but said regulators are keeping a close eye on inflation data and speculative activity."The `new normal' condition is not special," said Zhou, referring to a recent government catch phrase used to describe China's new lower-growth environment. "This does not necessarily require a new monetary policy formula," he addedYesterday's press conference came shortly after the central bank released upbeat economic data about credit creation. Mainland banks extended 1.02 trillion yuan (HK$1.26 trillion) of new loans in February, well above market expectations, while growth in broad money supply quickened.Total social financing, a broader measure of overall liquidity in the economy, fell to 1.35 trillion yuan in February, versus 2.05 trillion yuan in January.Broad M2 money supply in February rose 12.5 percent from a year ago, the central bank said, beating expectations of 11 percent and quickening from January's 10.8 percent, which was the weakest since records started in 1998.Outstanding loan growth was 14.3 percent in February, versus forecasts of 13.8 percent and the previous month's 13.9 percent.Jacqueline Rong, an economist at BNP Paribas in Beijing, said February new loans were the second highest for that month, after 2009.REUTERS