China’s expectations for near-term easing cooled, and the yuan strengthened after comments by the People’s Bank of China officials that China will retain the prudent monetary policy.
- Pan Gongsheng, a vice governor at China’s central bank stated on Tuesday that China will not resort to flood-like stimulus.
- Pan further noted that the room for monetary policy is still relatively big in response to analyst’s comments that signaled that the Chinese central bank could conduct policy in a normal range.
- Indicators that China’s economy is losing momentum and small businesses are crumpling had improved market expectations of policy support sooner than anticipated.
- The PBOC last reduced its bank’s reserve requirement ratio (RRR) in July, in a move that worried many market players. They expected that the Chinese economy was weaker, and there was a need for easier credit conditions.
China’s government indicating support for credit growth, stated on Sept. 1 that the central bank would expand annual re-lending quotas by 300 billion yuan ($46 billion) to help small firms. But recent comments by PBOC cooled market expectations for possible policy easing in the short run.
CSI 300 Index down -0.41%, CNY USD up +0.19%Source: Reuters
