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China will pursue a stable monetary policy with an appropriate level of flexibility in 2020, the People's Bank of China (PBC) noted in a statement it published on Sunday. 

The central bank of China set the tone for this year's monetary policy in its annual work conference held in Beijing on Thursday and Friday. 

According to the PBC statement, China will strengthen counter-cyclical adjustment to keep liquidity reasonably adequate. It will further deepen interest rate marketization reform and let the market play a decisive role in the formation of interest rates. It also noted that it would keep the yuan's exchange rate generally stable this year. 

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, said that the government didn't change the major keynote of the country's monetary policy, which is stabilization for this year. 

"Although China's economy is facing downward pressure, the government is very cautious of loosening monetary policy too much for fear of side effects such as inflation and wealth shrinking. I believe the government will rely more on fiscal policies to support domestic enterprises," Dong told the Global Times on Sunday. 

But he said that the government might ease liquidity "periodically" this year with means such as further reserve requirement ratio cut (RRR) or using financial tools like a medium-term fending facility (MLF), to meet seasonal market demands for capital. 

The PBC on Wednesday announced a decision to cut the RRR for financial institutions by 50 basis points from Monday to support the development of the real economy.Last year, the PBC set the direction for monetary policy as being "stable with appropriate degree of tightness." 

The PBC also stressed that China would push the research and development of legal crypto tokens in 2020, and further expand the application of the Legal Entity Identifier, which is the global identifier of legal entities participating in financial transactions, in China this year. 

"With China's strong market basis for internet usage, China can outperform overseas countries in the popularization of crypto token usage. The government is pushing this to happen as the crypto token, which guarantees better security in payment, can improve the monitoring of financial risks in China," Dong said. 

Global Times