China's central bank vows greater support for real economy

China’s central bank pledged greater support for the real economy, and said it will make monetary policy more forward-looking and targeted.

There will be more “proactive” use of monetary policy tools, the People’s Bank of China said in a statement on Saturday. The monetary policy committee held a meeting on Friday that was chaired by Governor Yi Gang, it said.

The central bank also reiterated its aim to promote the property sector’s “healthy” growth and protect home buyers’ rights, as well as work to better meet housing demand.

The PBOC has so far taken a restrained approach to monetary stimulus but expectations are growing that it will do more in the new year, especially if property market problems and slowing private consumption continue. With many global central banks including the Federal Reserve looking to tighten policy or already raising rates, further monetary easing from the PBOC would widen that divergence and could start to put pressure on the currency. 

The PBOC allowed banks to lower the benchmark lending rate by 5 basis points earlier this month, after unleashing 1.2 trillion yuan ($188 billion) of money by cutting the amount of funds banks are required to keep in reserve. It also reduced the interest rate for the re-lending program for small businesses, with credit growth picking up in November after slowing for almost a year.

Analysts expect more easing to come next year, including further cuts to the reserve requirement ratio and potentially a reduction in policy interest rates, as the ongoing property slowdown likely continues to drag on growth next year. Authorities also signaled more fiscal support in early 2022 to drive investment and infrastructure building.