(Yicai) Aug. 12 -- China’s prudent monetary policy should focus on balancing several factors to create the perfect monetary and financial environment to achieve the annual economic and social targets and tasks.

The People’s Bank of China will strive to balance short- and long-term relations, economic growth and risk prevention, and internal and external environments to enhance the consistency of its macroeconomic policy orientation, strengthen counter-cyclical adjustments, and support the economic recovery, it said in its second-half monetary policy report released on Aug. 9.

Pursuing growth while ensuring stability will remain the key path to spur high-quality financial development, deepen financial system reforms, and facilitate the transformation of the monetary policy framework, the PBOC noted.

In terms of monetary policy, the PBOC will reasonably balance the relations between the loan and bond markets, guiding rational growth and balancing the issuance of loans to maintain sufficient liquidity and keep the social financing size and money supply amount in line with economic development and price targets.

Moreover, the PBOC will improve the mechanism for the formation and transmission of market-oriented interest rates, give full play to policy interest rates, unleash the effectiveness of the loan market’s prime interest rate reform and deposit interest rates’ market-oriented adjustment mechanism, promote financial institutions to improve their independent pricing capability, and support the reduction of corporate financing and resident credit costs.

The central bank also noted it will unblock the transmission mechanism of monetary policies, enrich and improve the toolkit of monetary policies, and increase the fund use efficiency.

In terms of exchange rates, the PBOC will adhere to a managed floating exchange rate system based on supply and demand and adjusted to a basket of currencies, exploit the role of the market in the formation of exchange rates, rectify pro-cyclical behaviors, prevent unilateral expectations, avoid exchange rate overshooting risks, and maintain the Chinese yuan exchange rates reasonably balanced.

The PBOC will also implement measures to prevent and resolve risks in major fields, such as real estate, local government debts, and small- and medium-sized financial institutions, to promote the economy’s high-quality development.

Editor: Futura Costaglione