Chinese central bank official sees liquidity balanced, no big swings in Q4

FILE PHOTO: People walk in Lujiazui financial district during sunset in Pudong, Shanghai, China July 13, 2021. Picture taken July 13, 2021. REUTERS/Aly Song

BEIJING (Reuters) - Liquidity in China’s banking system will be basically balanced in the fourth quarter, with no big fluctuations, a central bank official said on Friday.

The People’s Bank of China (PBOC) will stick to normal monetary policy, which will be flexible, targeted and appropriate, Sun Guofeng, head of the central bank’s monetary policy department, told a briefing.

The PBOC will use various tools to keep liquidity reasonably ample and enhance stability of total credit growth, he said.

“In the fourth quarter, supply and demand of liquidity in the banking system will continue to be basically balanced and there won’t be any big fluctuations,” Sun said.

The PBOC is likely to keep banks’ reserve requirement ratio (RRR) unchanged in the fourth quarter, before delivering another 50-basis points cut in the first quarter of 2022, the latest Reuters poll of economists showed.

In July, the PBOC cut the RRR for banks, releasing about 1 trillion yuan ($155 billion) in long-term liquidity. Until recently, most analysts had expected another RRR cut this year, though some still hold out that possibility.

The PBOC will keep the yuan basically stable, Sun said, adding China’s inflation was under control.

The central bank will provide low-cost funds to financial institutions to support carbon emission reductions and help achieve the country’s carbon neutrality goals, he said.

($1 = 6.4318 Chinese yuan renminbi)

Reporting by Kevin Yao and Beijing newsroom; Editing by John Stonestreet and Mark Potter