China’s Apex Bank Vows Flexible Policy to Bolster Demand

China’s central bank, the People’s Bank of China (PBOC), announced on Thursday its commitment to maintaining flexible and precise monetary policies aimed at boosting domestic demand while ensuring price stability. This declaration comes against the backdrop of a patchy economic recovery and increasing deflationary risks facing the world’s second-largest economy.

In its quarterly policy implementation report, the PBOC acknowledged the challenges posed by global uncertainties in fostering economic growth. Emphasising the need for prudent monetary measures, the bank outlined its strategy of flexibility, moderation, precision, and effectiveness in managing social financing and money supply to align with targeted economic growth and price levels.

The central bank affirmed its dedication to enhancing policy coordination and cooperation to support consumption, stabilise investment, expand domestic demand, and maintain prices at reasonable levels. With weak consumer demand and declining prices presenting significant challenges, the PBOC acknowledged the necessity of easing policy measures, despite constraints arising from concerns over capital flight and currency stability.

Recent data revealing a sharp decline in consumer prices, the most significant drop in over 14 years in January, alongside a decrease in producer prices, has intensified pressure on policymakers to address the economic slowdown and deflationary risks. In response, the PBOC reiterated its commitment to promoting market-oriented deposit interest rates to drive down overall interest rates, signalling its intent to stimulate economic activity and counter deflationary pressures.

As China navigates through economic headwinds, the PBOC’s pledge to adopt flexible and targeted monetary policies underscores its proactive approach in addressing challenges while safeguarding financial stability. By prioritising domestic demand and price stability, the central bank aims to bolster confidence and propel sustainable growth in the face of evolving global economic dynamics.