(Yicai Global) Nov. 4 -- "There have been some heated discussions lately about a possible shift in the Chinese monetary policy. However, China's monetary policy has not reached a crucial point and is unlikely to be moved toward monetary restrictions", said Chen Daofu, Vice Director General of the State Council's research institute for finance development research center.
During a recent meeting, the Polit Bureau of the Communist Party's Central Committee emphasized the curbing of asset bubbles and China's central bank has not cut the required reserve ratio or interest rates in the last six months. This, coupled with the continued devaluation of the CNY against the USD, gave rise to speculations that China's monetary policy may be reversed.
It is not a suitable time now to replace the prudent monetary policy with a tightening one, said Chen. Monetary policymaking in China has always been based on the capital market. The central government's call to curb asset bubbles indicates that the government places considerable emphasis on preventing potential asset bubbles in the Chinese market.
Monetary policy will be operated with greater care to avoid monetary and credit oversupply like the one which occurred in early 2016, and greater attention will be paid to the development of financial businesses in terms of supporting real economic growth.
The objectives of monetary policymaking are multifold. China's exposure to financial risks has been on the rise. The Chinese CPI has remained at around two percent and PPI growth has just moved back into the black after many years in the red.
Also, supply-side reforms are currently in progress. Thus, the primary goal of monetary policymaking in China is to push forward reforms, mitigate risks and create a relatively stable monetary climate.