BEIJING (Reuters) -China’s central bank said on Monday it would keep monetary policy flexible and appropriate to maintain stability as the pandemic persists and domestic economic recovery is uneven.
In its second-quarter monetary policy implementation report, the People’s Bank of China said it would keep liquidity reasonably ample and step up support for technology innovation, small firms and the manufacturing sector.
“The global epidemic is still evolving, the external environment is becoming more severe and complex, and the domestic economic recovery is still unstable and uneven,” the central bank said.
On the external environment, the PBOC cited a rebound in COVID-19 cases globally and the risk from expected policy shifts in developed countries that could affect cross-border capital flows.
It pledged to “grasp the strength and rhythm of policy” according to the domestic economic situation and price trend to maintain the overall stability of the economy.
China is poised to accelerate spending on infrastructure projects while the central bank supports with modest easing steps, as risks from the Delta variant and floods threaten to slow the country’s recovery, policy insiders and analysts said.
Effective July 15, the PBOC cut the reserve requirement ratio (RRR) for banks, releasing around 1 trillion yuan ($6.48 trillion) in long-term liquidity. Analysts expect another RRR cut this year.
At the end of June, the excess reserve ratio of Chinese financial institutions was at 1.2%, down 0.4 percentage point lower from a year earlier, the central bank said.
The weighted average corporate lending rate was at 4.58% in June, down 0.06 percentage points from a year earlier, it added.
China will promote the healthy development of capital markets and better protect the interests of investors, the central bank said.
($1 = 0.1544 Chinese yuan renminbi)