China alters policy to sustain growth

China’s central bank has pledged to intensify its monetary policy fine-tuning in the second half of this year and improve credit policy to bolster the real economy, echoing earlier government commitments amid an economic slowdown.

Its comments, made yesterday, follow a meeting of China’s top policymakers last week which said Beijing would step up efforts to make policies more targeted, pre-emptive and effective to cope with decelerating growth.

“In the second half, we must continue to reinforce fine-tuning and pre-emptive adjustment in monetary policy and improve credit policy to support the development of the real economy,” the bank said in a statement on its website.

The People’s Bank of China will enhance research into the economic situation at home and abroad to better steer policy and help maintain stable and relative fast economic growth this year, it added.

The central bank said it would widen the use of the yuan in cross-border trade and investment, and repeated that it would gradually push ahead with capital account convertibility for the yuan.

The central bank has also analysed potential problems faced by the country’s financial sector and will strengthen supervision to prevent systemic risk in the industry.

However, it did not say how it would contain such risks.

China’s economy is facing downward pressure from shrinking external demand and a domestic property market downturn, with the annual economic growth rate slowing to 7.6% in the second quarter of the year; the slackest pace in more than three years.

To spur growth, Beijing has followed a programme of policy fine-tuning since the autumn of 2011 — cutting interest rates, easing rules on bank lending, fast-tracking investment projects and cutting taxes and bureaucracy for businesses.

The latest Reuters benchmark poll forecasts that China’s economy should recover modestly in the second half, with growth of 7.9% in the third quarter and by 8.2% in the fourth quarter.