China to keep prudent, neutral monetary policy, PBoC says

BEIJING • China will maintain a prudent and neutral monetary policy while also assuring reasonable and ample liquidity, the People’s Bank of China (PBoC) said in a statement on Saturday.

China’s overall exchange rate and market expectations are stable, the PBoC said at its third-quarter (3Q) meeting. The central bank will manage the “floodgates” of monetary supply to maintain reasonable and ample liquidity, it said.

The bank acknowledged “more severe” global challenges and said it will step up policy fine-tuning. The country will continue to deepen financial system reform and open up the sector, said the bank.

PBoC aims for balance among interest rates, exchange rates and international payments to ensure stable and healthy development of the economy and to stabilise market expectations.

The bank also vowed to guard against financial risks and reaffirmed more financial support to the real economy and private sector.

Leading indicators for China’s economy show growth continued slowing in September amid the escalating trade war with the US. The September Purchasing Managers’ Indexes for the manufacturing and services sectors due to be released yesterday were both expected to edge lower, according to forecasters surveyed by Bloomberg.

Premier Li Keqiang vowed to further cut taxes, administrative fees and red tape in an effort to support the real economy, according to a government statement last Friday.

Li also called for speedy efforts to build a “market-oriented, legalised and internationalised” business environment. The premier made the remarks at a meeting with entrepreneurs in eastern China’s Zhejiang Province, one of the largest clusters of private enterprises in the nation and home to Alibaba Group Holding Ltd. Both private and state-owned enterprises are “important components” of the economy, Li said.

The remarks followed President Xi Jinping’s pledge that the nation will “unswervingly” encourage, support and protect development of the private economy, while at the same time encouraging stateowned enterprises to be “stronger, better and bigger”.

Separately, Finance Minister Liu Kun said total tax reductions scheduled for this year will exceed 1.3 trillion yuan (RM782.46 billion), higher than the 1.1 trillion yuan target set at the beginning of the year, in order to fend off pressure from escalating trade tension with the US, the state-owned China Daily newspaper reported last Friday.

Analysts say growing uncertainty will keep China from increasing borrowing costs for some time. Most PBoC watchers expect the central bank will continue raising the amount of liquidity in the financial system in the 4Q, according to a Bloomberg survey. — Bloomberg