PBOC to keep liquidity taps open as economic reforms pose risks

China’s economy may face a bumpy road in the second half of the year because of reform policies, the central bank said Friday.

In its second-quarter monetary policy report, the People’s Bank of China said its efforts might increase volatility in asset prices and raise debt levels, reported Reuters.

“The economy is still relatively reliant on policies intended to stabilize growth and on government-led investment,” the central bank said in the 64-page report

In an effort to ensure financial stability and avoid systemic and regional financial risks, the PBOC said it would maintain continuity and stability in its monetary policy. It will employ multiple monetary policy tools to maintain “moderate” liquidity and try to lower financing costs so that the real economy can benefit from financial services, said Chinese news agency Xinhua.

It’s been a difficult year for the world’s second-largest economy with a slowdown in its housing market and a stock market crash over the summer. For the first half of the year, growth came in at 7%, and most expect it to end the year at that level. However, this would be the country’s worst economic performance in a quarter century.

The report didn’t mention the outlook for interest rates and reserve requirements, but it said the yuan will be kept at a reasonable level and more flexibility will be introduced to the exchange rate.

Although the price of pork has surged in recent weeks and is expected to add to consumer inflation, the bank said consumer inflation was running at a low level, and that monetary policy would not target changes in the price of any specific good.



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