PBOC sees exit from stimulus
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China hasn't the economic foundation yet to adjust its active fiscal policy and appropriately loose monetary policy stance, but an orderly withdrawal from the stimulus packages can be expected, said a senior official of the central bank.
The country should exit the monetary stimulus packages first and then from the proactive fiscal policy, Yang Guozhong, director of the business management department of the People's Bank of China, wrote in the China Finance magazine.
He said soaking up excessive liquidity is the main task the central bank should focus on, and he disagreed that limiting loan quotas to commercial banks is the solution.
The government has gradually normalized its monetary policy stance after domestic banks lent a record 9.6 trillion yuan (US$1.42 trillion) of new credit last year.
The monetary growth has decelerated since November, and China has targeted money supply to expand 17 percent this year and set a target of 7.5 trillion yuan in new loans.
"The central bank should use market-oriented measures, such as adjusting reserve requirement ratios, open-market operations and interest rate policies at an appropriate time to control liquidity," Yang wrote.
The PBOC has raised the reserve requirement ratio three times this year and used open market operations to drain cash out of the market.
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