China's central bank to properly shift monetary policy: Report

BEIJING -- China's central bank is expected to shift away from its relatively easy monetary policy in an orderly manner, an investment bank report has said.

The People's Bank of China (PBOC) issued its quarterly report Friday, in which it outlined its intention to implement a prudent and neutral monetary policy while keeping liquidity basically stable.

China has maintained a prudent monetary policy since 2011. In practice, however, it has been slightly eased for a period of time to alleviate pressure from a slowing economy. With the economy now showing more signs of firming up, policy makers are looking to implement a "prudent and neutral" policy in 2017.

Following the central bank's report, China International Capital Corp (CICC), a Beijing-based investment bank, released a research paper, in which it said that the PBOC could manage the pace at which it shifts its monetary policy and still maintain stable market liquidity.

With the central bank recently raising the short- and long-term lending rates between banks, a barometer of the overall lending climate, CICC expects the PBOC will continue to phase out monetary easing to rein in asset prices and inflation.

It projected that the central bank will roll out more measures to advance financial deleveraging, guide money to the real economy and ward off financial speculations.

With the Chinese economy still facing a number of uncertainties, the investment bank does not foresee either the benchmark lending or deposit rates rising in the near future.

The central bank's shift from monetary easing does not necessarily mean more monetary tightening, it noted.

China's GDP grew 6.7 percent year on year in 2016, the lowest reading in nearly three decades, but within the government's target range.

The PBOC underlined in its quarterly report that it will work to strike a better balance between stabilizing growth, adjusting structure, curbing asset bubbles and preventing risks.

CICC noted that the monetary policy shift will not restrict economic growth since real interest rates are likely to fall amid rising inflation, which could keep economic activities vibrant.