The headquarters of the People's Bank of China in Beijing Photo: IC

The potential growth rate of China's economy is expected to be maintained within a reasonable range, and the country has conditions to keep in place a normal monetary policy, positive interest rates as well as normal and upward yield curve, Yi Gang, governor of the People's Bank of China, the central bank, wrote in a paper published on the Economic Research Journal recently.

He said the central bank will leverage structural monetary tools and step up financial support for some important but lagging economic sectors, domestic media outlet Thepaper reported on Thursday.

Overall, China has been active in monetary policy adjustment, and has achieved economic and financial system stability, handled multiple external challenges and contributed to high-quality development with independent monetary policies that are relatively stable and low-cost, according to Yi.

Despite dramatic changes in developed economies' interest rates, China's monetary policy remains committed to charting its own course, with notable improvement in autonomy and effectiveness, according to Yi.

While strengthening counter-cyclical adjustments, the policymakers attach importance to cross-cyclical policy adjustment and cross-regional balance by considering complex factors such as time lag so as to ensure prudence and room for policy relaxation and tightening, Yi said. 

He said the country's monetary policy has always been within a normal range, with real interest rates largely matching potential economic growth rate.

In order to improve the autonomy and effectiveness of China's monetary policy and achieve long-term economic and financial stability, Yi said the country will continue to maintain stable monetary settings, deepen market-oriented reform of interest rates and exchanges rates, and strengthen policy coordination.
He stressed that China will refrain from adopting excessive stimulus and will not engage in quantitative easing.

In addition, China will steadily deepen market-oriented reform of foreign exchange rate, and stick with a managed floating exchange rate based on market supply and demand and adjusted in accordance with a basket of currencies, Yi said. He pointed to efforts in enhancing the flexibility of the yuan's exchange rate, strengthening expectation management and insisting bottom-line mindset so as to prevent risks and ensure the yuan's stability at a reasonable level.

Yi said the policymakers will continue to improve macro-prudential framework, and prevent financial risks, noting that they will strengthen and improve modern financial regulation.

Global Times