(Yicai) April 28 -- China’s central bank will cut the reserve requirement ratio and interest rates at the appropriate time, based on economic conditions and financial market developments, to maintain abundant liquidity, according to a deputy governor.

The People's Bank of China will step up the implementation of more proactive and effective macro policies and make good use of its moderately loose monetary policy, Zou Lan said at a press conference today.

The PBOC will fully leverage both the aggregate and structural functions of monetary policy tools, create new structural policy instruments, focus on key areas related to stable employment and growth, and strengthen financial support in a targeted manner, Zou added.

Targeted Areas

First, the PBOC will strengthen support for employment with precision, per the vice chief. It will increase efforts to promote the implementation of guaranteed loans for entrepreneurship and bolster support for key groups such as migrant workers who return to their hometowns, new residents, college graduates, and women.

The second priority is stabilizing foreign trade. The PBOC will guide financial institutions to ensure reasonable financing for small and medium-sized enterprises that are highly dependent on foreign trade, temporarily experiencing difficulties, but have competitive products.

Moreover, the central bank aims to promote consumption. It will focus on enhancing the supply side of service consumption, increasing financial support in key sectors such as culture, tourism and sports, catering and accommodation, and education and training. It will also align with other policies to promote a substantial increase and improvement in service supply to meet people's growing and diversified needs.

Finally, the PBOC seeks to expand investment. It will support financial institutions in innovating financial instruments and increasing the allocation of medium- and long-term loans.

In addition, the PBOC is studying new policy tools. If permitted, it will introduce incremental policies to help stabilize employment, enterprises, markets, and expectations, thereby consolidating the fundamentals of economic development and social stability.

Forex Market

Zou also commented on the recent fluctuations in the US bond market. He emphasized that China’s foreign exchange reserves have long been invested in international financial markets in accordance with market-oriented and specialized principles, prioritizing safety, liquidity, and value preservation and appreciation. As a result, China has achieved effective diversification. Changes in a single market or a single asset have only a limited impact on China's forex reserves, he noted.

Zou pointed out that China's economy remains solid, with balanced international payments and a resilient forex market, which will continue to provide strong support for maintaining the yuan’s exchange rate at a basically stable level.

Looking ahead, the PBOC will continue to adhere to a managed floating exchange rate system based on market supply and demand and a basket of currencies, according to Zou. It will maintain the decisive role of the market in exchange rate formation, enhance the resilience of the forex market, stabilize market expectations, strengthen market oversight, and resolutely correct pro-cyclical behaviors. The PBOC will deal with illegal market activities with zero tolerance, work to prevent the risk of exchange rate overshooting, and keep the yuan’s forex rate at a reasonable and balanced level, he concluded.

Editor: Emmi Laine