A view of the PBC's headquarters in Beijing Photo: cnsphoto

China's central bank or People's Bank of China (PBC) disclosed in a policy report on Monday night that it would aim for stability in monetary policy instead of adopting sharp changes, despite some market speculation that China may tighten monetary policies amid a better-than-expected economic recovery and mounting debts.

In the 2020 fourth quarter China monetary policy execution report, the PBC said its policies will aim at "maintaining the stability of the currency, and helping boost the economic growth". To achieve that goal, the bank's monetary policies will be "flexible", "precise", "reasonable" and "moderate".

"There is a focus on stability, instead of adopting 'sharp turns'," the bank wrote in the report.

The PBC also noted that it would use multiple monetary policy tools to keep liquidity at adequate levels, while at the same time adjust the strength, pace and focus of those policies. Such tools include open market operations, refinancing and rediscount.

In particular, the PBC urged the market not to focus excessive attention to the number of open market operations it would take, as such operations will be adjusted according to temporary factors such as cash and finance, and they don't represent the changes in the PBC's policy rate or the trend of market interest rates.

At the same time, China would also strengthen management on deposit products including remote deposits or new innovation to avoid unreasonable competition and keep the costs of banking liability stable, the bank said.

Analysts said that the PBC's clarification is aimed at dispelling market concern about tightening policies, and to set a tone for the continuity and stability of China's monetary policies.

Global Times