China’s Economy Is Stabilizing and Improving, PBOC Says

© Reuters. China’s Economy Is Stabilizing and Improving, PBOC Says

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China’s central bank provided a more positive outlook of the economy, saying it’s showing more stability and improvement even though domestic and global risks remain.

The People’s Bank of China will step up its coordination with global economic policies and prevent “external shocks,” the monetary policy committee said in a statement Monday at the conclusion of its quarterly meeting. The committee reiterated that China’s prudent monetary policy will be targeted and reasonable, and the central bank will keep liquidity reasonably ample.

After record economic expansion in the first quarter, recent indicators show growth is stabilizing and showing more balance. The PBOC has kept its policy stance unchanged this year, taking a gradual approach to curbing credit growth to tackle financial risks, while providing enough liquidity to the market to meet demand.

Read More: China’s Recovery Stabilized in June With Signs of Rebalancing

The statement indicates the committee has a more positive view on the economy than in the first quarter, when it said the recovery was “still unbalanced,” Citic Securities analysts led by Ming Ming wrote in a note Tuesday. The PBOC will probably keep monetary policy stable, and is unlikely to loosen policy significantly going forward, they said.

The central bank kept the rest of the language in the statement largely unchanged. It reiterated that the macro leverage ratio, or total debt as a proportion of gross domestic product, will be kept stable, and vowed to match the expansion of money supply and aggregate financing in the economy with the nominal GDP growth rate.

The PBOC also repeated that it will boost exchange rate flexibility and keep the yuan stable at a reasonable, equilibrium level.

Huachuang Securities analysts including Zhou Guannan said the mention of “external shocks” shows the PBOC is paying more attention to the overseas policy environment amid growing signals the Federal Reserve may start to roll back its pandemic stimulus in the second half of this year. The PBOC is prepared to deal with the impact of the Fed’s potential tightening because it has already started to normalize its policy, they said in a note Tuesday.

(Updates with analyst comments in the fourth and seventh paragraphs)

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