The office building of the People's Bank of China in Beijing. Photo: CFP

China's central bank on Monday vowed to maintain monetary policy stability and resolutely avoid a flood of stimulus.

In the second quarterly monetary policy implementation report, the People's Bank of China (PBC), the country's central bank, reiterated its "non-flood irrigation" stance as it planned continued support for the real economy to keep economic operations within a reasonable range.

The PBC pledged to maintain a normal monetary policy, improve cross-cyclical policy design and strengthen macro policy independence, striking a balance between economic development and risk prevention in accordance with the domestic economic situation and price trends, read the quarterly report.

The central bank said that it would maintain reasonably sufficient liquidity, and ensure that money supply and social financing grow at a pace that's largely on par with the nominal economic growth rate. 

The macro leverage ratio will be kept basically stable, while price trends will be closely watched to stabilize public expectations and maintain an overall steady price level.

Consumer inflation stayed at roughly 1 percent during the second quarter and is expected to remain steady in the second half. Producer price inflation, albeit going up as a consequence of rising commodity prices and low base readings, will moderate after the phased spike, according to the PBC report.

The country has stuck to implementing a normal monetary policy since COVID-19 battered the economy early last year, with overall supply and demand remaining steady, the central bank said, and there is no basis for either long-term inflation or deflation.

Looking ahead, the PBC eyes continued improvement of savings rate supervision while pushing for lower loan rates. Moreover, it has plans to strengthen yuan exchange rate flexibility, stabilize market expectations and enhance macro-prudential management of cross-border financing.

The PBC reiterated efforts to keep the yuan basically stable at a reasonable and balanced level.

The central bank's latest remarks were considered to make the case for the continuation of current monetary policy that's weighted toward growth but avoids unconventional practices. 

The country's broad M2 money supply grew 8.6 percent year-on-year in June, while new bank loans totaled 2.12 trillion yuan ($327.26 billion), central bank data showed, both topping analysts' expectations.

Effective July 15, the reserve requirements for domestic banks and financial institutions were cut by 0.5 percentage points, in a move estimated to inject long-term capital of about 1 trillion yuan to shore up growth in the second half.

Global Times