China's monetary policy to offer more counter-cyclical flexibility: newspaper

BEIJING -- As China will continue to implement a prudent monetary policy in 2020, analysts have predicted more fine-tuning measures and more precise stimulus to support the real economy for the upcoming year, the Economic Information Daily reported Wednesday.

The annual Central Economic Work Conference has decided that the country's prudent monetary policy should be pursued with moderate flexibility to maintain market liquidity at a reasonably ample level for 2020.

The central bank is expected to comprehensively apply policy tools to make flexible and vigorous adjustments in accordance with domestic and external variables including economic growth and consumer prices, Dong Ximiao, a researcher with the National Institution for Finance and Development, was quoted by the newspaper as saying.

Despite more adjustments suggested by the conference, China's monetary policy would not slide to quantitive easing as the overall tone of prudence remains unchanged, said Dong.

The growth of credit and social financing should be in keeping with economic development, and social financing costs should be reduced, according to the conference.

Since the beginning of this year, the central bank has reduced the reserve requirement ratio (RRR) by a total of 1.5 percentage points, amid interest rate cuts via the medium-term lending facility and open market operations.

There is still room and need for further RRR and policy interest rate cuts to lower the loan prime rate and financing costs of the real economy, reported the paper citing industry insiders.

The country's monetary policy, however, would not resort to flood-style stimulus while facilitating counter-cyclical adjustments, the paper reported.

"It has become a consensus that the flood-style approach must be avoided as we are facing multiple tasks in stabilizing economic growth, consumer prices, currency and finance," said Wen Bin, chief researcher with China Minsheng Bank, stressing method innovation in counter-cyclical adjustments.

The country's top regulator would continue to channel funds into key sectors of the real economy via the "drip irrigation" approach, the newspaper quoted industry insiders as saying.

More targeted measures are expected to be rolled out in 2020 to offer financing support for privately owned, small- and medium-sized firms, said Wang Qing, a chief macroeconomy analyst with Golden Credit Rating International.