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China central bank says to maintain neutral policy, stable yuan

Reuters  |  HONG KONG/BEIJING 

HONG KONG/(Reuters) - China's will maintain its neutral and keep liquidity and credit growth largely steady while keeping the yuan currency basically stable, it said on Friday.

The central bank's surprising cut in reserve requirement ratios (RRR) on April 17 and growing fears of a trade war with the have fanned market expectations of looser policy to support the

of will fend off systemic risks and use multiple tools to ensure financial stability in the world's second largest economy, it said in its first-quarter implementation report.

The will strike a balance between stabilising economic growth, pushing structural changes and preventing risks, it said.

"On the one hand, it is necessary to control the liquidity scale to help deleverage and prevent financial risks. On the other hand, it is necessary to comprehensively consider changes in the macroeconomic environment and strengthen policy coordination," the said.

China's overall debt level rose 2.7 percentage points in 2017 to 250.3 percent of due to impacts from China's supply-side reforms, improving and corporate profits, the bank said.

The corporate debt ratio fell 0.7 percentage points last year to 159 percent of GDP - the first decline since 2011, while household debt ratio climbed 4 percentage points to 55.1 percent of GDP, it said.

The central bank also plans to include negotiable certificates of deposit (NCDs) issued by financial institutions with assets of less than 500 billion yuan ($79 billion) in its quarterly macro-prudential assessment (MPA) from the first quarter in 2019.

The central bank reaffirmed that it will keep the yuan basically stable while increasing the currency's two-way fluctuations and deepening market-based currency reforms.

The weighted average lending rate for non-financial firms, a key indicator reflecting corporate funding costs, rose 22 basis points in the first quarter to 5.96 percent, following a 2 basis points drop in the previous quarter.

($1 = 6.3302 Chinese yuan renminbi)

(Reporting by Twinnie Siu, Meg Shen and Kevin Yao; Editing by and Toby Chopra)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Mon, May 14 2018. 11:04 IST
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