People's Bank of China Removes 'Daesuman-gwan' Expression... Signal of Active Stimulus Policy

[Asia Economy Beijing=Special Correspondent Park Sun-mi] The People's Bank of China indicated that it will operate monetary policy more flexibly to revive the Chinese economy, which has been hit by the outbreak of COVID-19, and to prevent financial risks. More proactive monetary easing measures are expected compared to the past.

In the '2020 Q1 Monetary Policy Implementation Report' announced by the People's Bank of China on the 10th (local time), the phrase about refraining from flooding the market with liquidity to stimulate the economy was removed.

In the '2019 Q4 Monetary Policy Implementation Report' released in February this year, the People's Bank of China used the expression "not to engage in 大水漫灌 (D?shu?m?ngu?n, literally 'flood irrigation' or flooding the market with liquidity) and to maintain economic operations within a reasonable range." The term 大水漫灌 has consistently appeared in the People's Bank of China’s monetary policy reports, and Premier Li Keqiang has repeatedly emphasized in speeches that "comprehensive economic stimulus through flooding the market will be avoided."

In this report, the People's Bank of China deleted the term 大水漫灌 and instead stated, "The sudden outbreak of COVID-19 in Q1 has dealt an unprecedented shock to China's economic and social development. The Chinese government prioritizes COVID-19 control while supporting the recovery and development of the real economy, comprehensively utilizing various tools to effectively respond to the shock. Liquidity will be maintained reasonably and abundantly, credit support will be increased, and innovative methods will be employed to ensure the effective market implementation of monetary policy." The People's Bank emphasized, "Although the long-term positive trend of the Chinese economy remains unchanged, given the increased global uncertainties, support will be provided to make the recovery of the real economy more prominent, and liquidity will be maintained reasonably and abundantly."

Economic experts view the People's Bank of China's monetary policy report as a signal heralding more aggressive monetary easing in the future. The Global Times analyzed on the same day that "it is a signal that the People's Bank of China may become more aggressive in monetary easing through benchmark interest rate cuts and reductions in bank reserve requirements." Zhao Qingming, an international finance expert, explained, "Until now, the Chinese government has restrained the intensity of monetary policy and relied more on fiscal policy as a method to boost economic growth. However, this report implies that instead of waiting for economic statistics to make monetary policy decisions, stronger monetary easing may be implemented." He expects the People's Bank of China to soon implement additional interest rate cuts and advised, "To revive the Chinese economy, which has shown its lowest growth rate since 1997, monetary policy must play a decisive role in supporting the economy."

This content was produced with the assistance of AI translation services.