The deputy governor of China's central bank recently emphasized that there is still ample monetary policy room to deliver further cuts to banks' reserve requirement ratio (RRR). This highlights the ongoing market expectations for more easing measures to support and strengthen the economy. The PBOC announced a significant 50-basis points cut in RRR in January, the largest in two years, signaling a proactive approach to addressing economic challenges.
Deputy Governor Xuan Changneng stressed that China's monetary policy is backed by ample room and rich policy tool reserves, indicating a readiness to take further action as needed. As the economy faces persistent weaknesses in the property sector, policymakers are keen to bolster confidence and stimulate growth. With a potential for more cuts to the RRR, the focus is on putting the economy on a more stable and sustainable trajectory.
The recent decline in deposit costs and the evolving monetary policies in major economies are expected to play a significant role in shaping China's interest rate policy operations. Deputy Governor Xuan mentioned that these factors would support the effectiveness of the country's monetary policy initiatives. By promoting effective investment and addressing excess capacity, China aims to maintain a nominal economic growth target of around 8% in 2024.
While Premier Li Qiang unveiled a 2024 economic growth target of “around 5%” at the annual parliamentary meeting, concerns remain about the feasibility of this goal. Analysts have pointed out that the target is ambitious, especially considering the ongoing crisis in the property sector. The government is working towards transforming the growth model, defusing risks in the property sector, and addressing local government debt challenges to support sustainable growth.
China's monetary policy continues to evolve in response to economic dynamics and global trends. With a focus on ensuring financial stability, promoting investment, and addressing structural challenges, policymakers are exploring various tools and strategies to sustain growth momentum. As uncertainties persist, the flexibility and adaptability of China's monetary policy framework will play a crucial role in navigating the complex economic landscape.