A view of People's Bank of China in Beijing. File photo: VCG

China will pursue a stable monetary policy with an appropriate level of flexibility in 2020, the People's Bank of China (PBC), the country's central bank, noted in a statement published on Sunday. 

The PBC set the tone for this year's monetary policy in its annual work conference held in Beijing on Thursday and Friday. 

China will strengthen counter-cyclical adjustment to keep liquidity reasonably adequate. It will further deepen market-oriented interest rate reform and let the market play a decisive role in the formation of interest rates, according to the statement. 

It also noted that it would keep the yuan's exchange rate generally stable this year. 

Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology, said that the PBC hasn't changed the major keynote of the country's monetary policy: stabilization for this year. 

"Although China's economy is facing downward pressure, the government is very cautious about loosening monetary policy too much for fear of side effects such as inflation and the erosion of asset value," Dong told the Global Times on Sunday.

Dong believed the government will rely more on fiscal policies to support domestic enterprises. 

He nevertheless noted that the government might ease liquidity "periodically" this year with financial tools like the medium-term lending facility, to meet seasonal market demand for capital. 

The PBC on Wednesday announced a decision to cut the reserve requirement ratio for financial institutions by 50 basis points from Monday to support the development of the real economy.

In 2019, the PBC set the direction for monetary policy as being "stable with an appropriate degree of tightness." 

The PBC also said that China would push the research and development of legal crypto tokens, and further expand the application of the Legal Entity Identifier, a global identifier of legal entities participating in financial transactions, this year. 

"With China's strong market basis for internet usage, China can outperform overseas countries in the popularization of crypto token usage. The government is pushing this to happen as crypto tokens, which guarantee better security in payments, can improve the monitoring of financial risks in China," Dong said. 

The central bank is about to roll out its own digital currency electronic payment (DC/EP) system, the Global Times reported in November.

In terms of technology, the PBC has attached great importance to research of the widely anticipated currency over the past five years. 

As of early August last year, the PBC had applied for 74 patents involved with the DC/EP project to the National Intellectual Property Administration, according to data from the central bank.

The meeting also pointed to strengthened support for small and micro-sized enterprises by using various policy tools.

China outperformed targets set at the beginning of last year, with outstanding loans to such firms by state-run commercial banks increasing more than 30 percent while credit costs were down by 1 percentage point, the PBC said.
Newspaper headline: China to pursue stable monetary policy