International Finance: PBOC Pledges to Use More Policy Tools, Avoid Credit Collapse

The People’s Bank of China will “open monetary policy tool box wider, maintain stable overall money supply and avoid a collapse in credit,” Deputy Governor Liu Guoqiang said Tuesday at aThe central bank will roll out more policies to stabilize economic growth, front-load actions and make preemptive moves, he said. It will address common concerns in the market in a timely manner and stay ahead of the market curve, he said.

The PBOC “sent a loud and clear easing signal through today’s press conference, partially as policymakers try to guide market expectations,” Goldman Sachs economists led by Maggie Wei wrote in a note Tuesday. Liu’s remarks suggest the LPR will likely be lowered Thursday and the RRR could be cut if growth disappoints, they wrote. Goldman now expects a 50-basis point RRR cut in the first quarter and another 10-basis point policy interest rate cut in the second quarter.

In response to a question about possibility of further rate cuts, Liu said the average corporate loan interest rate was 4.61% in 2021, the lowest level in over four decades. This comment suggests there’s now less likelihood of another rate cut, though it could happen depending on how well the economy performs in the first quarter and whether the property sector recovers, Xiong Yuan, chief economist at Guosen Securities Co.,The PBOC’s easing stance is in stark contrast with other major central banks like the Federal Reserve, which is forecast to

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