PBOC Should Further Reduce Loan Prime Rate, Deputy Governor Says(Yicai Global) March 23 -- China's central bank should continue to advance reforms of the loan prime rate to decrease interest rates for real economy players looking to borrow money, according to its Deputy Governor Chen Yulu.
The People's Bank of China is planning to enhance support for small- and medium-sized banks and their issuance of bonds to reduce the impact of Covid-19 on the financial system, Chen said at a press briefing yesterday.
The pandemic has not directly increased the number of bond defaults in China and the turmoil in international stock markets did not lead to excessive volatility in local markets, he added, saying the number of companies flunking on bonds is comparable with the past and the number of firms defaulting for the first time has actually fallen.
There have been major fluctuations in international foreign exchange rates as a result of Covid-19, leading to some variance in yuan rates, Chen continued, adding that yuan rates have remained mostly stable and the redback has lost just 1.8 percent against the dollar so far this year, compared to the euro losing 4.7 percent and pound losing 12 percent, he added. Chen expects the yuan will keep moving both ways and eventually hover around the seven-to-the-dollar mark.
The yuan's exchange rates will still depend on China having stable economic fundamentals long term, Chen said, saying continuous improvements in domestic control of Covid-19 and the rising number of firms re-opening for business shows bright prospects for the long-term prosperity of the Chinese economy and the yuan.
In the short term, tight dollar liquidity and the rising dollar index will inevitably hamper emerging economics, like China, added Xuan Cangneng, vice director of the State Administration of Foreign Exchange, at the same conference. In the longer run, China's economic fundamentals, currency and financial conditions will provide strong support for the stabilization of cross-border capital flow and the yuan exchange rate should remain reasonable, he said.
Editor: James Boynton
