(Yicai) Aug. 18 -- China will focus on optimizing fund allocation while keeping overall financial growth on track and directing more resources to key areas such as science and technology innovation and advanced manufacturing, the People’s Bank of China said in its monetary policy implementation report for the second quarter.

This report, which was published on the PBOC’s website on Aug. 15, clearly outlines three core directions for future financial services, namely inclusive finance, science and technology innovation as well as service consumption. It also states that the next phase of monetary policy will continue to implement a moderately loose stance, to ensure that policies are effectively executed while at the same time strengthening co-ordination with other macro policies.

From a micro-perspective, the PBOC is optimizing loan structures in multiple ways, industry experts said. Most new loans are going to new growth drivers and sectors supporting domestic demand. The structure of new loans has shifted from around 60 percent and 70 percent in real estate and infrastructure back in 2016 to between 60 and 70 percent in technologies, green development, inclusive finance and elderly care. This shows that bank lending aligns with China’s economic transformation and upgrading.

The report clearly lays out the main directions for how financial services will support the real economy in the future. First, it calls for further improving access to and the sustainability of inclusive finance to promote high-quality development in this area. Second, there will be additional support for science and tech innovation. A large portion of credit will be directed to this sector with additional policy support tools to increase lending, lower costs and expand the coverage of services. Third, an emphasis will be put on service consumption so as to improve high-quality service supply.

The next steps will further implement a moderately loose monetary policy by ensuring that all measures are effectively executed, the report said. Multiple monetary policy tools will be used to maintain adequate liquidity. 

The key going forward is to effectively execute a moderately loose monetary policy, closely track how earlier policies are working and their real-world impact, as well as maintain continuity and enhance flexibility so as to fully release policy effects, the experts said. Also, in order to consolidate and build on the positive momentum in the economy, it is important to strengthen alignment across macro policies and fully leverage policy synergy.

Editor: Kim Taylor