China's PBOC has room to ease policy but won't squander options - official

FILE PHOTO: Headquarters of the People's Bank of China (PBOC), the central bank, is pictured in Beijing, China September 28, 2018. REUTERS/Jason Lee/File Photo

BEIJING (Reuters) - China has room to ease monetary policy further, but authorities should not be careless in how they use such stimulus options, a central bank official said on Friday, reinforcing its cautious stance.

“Our monetary policy has space...but such policy space cannot be squandered at will,” Zhang Xuechun, the deputy director of the research bureau at the People’s Bank of China (PBOC), said at a forum in Beijing.

Zhang’s remarks echoed those of PBOC governor Yi Gang, who has said that China is in no rush to follow other countries in significantly loosening monetary policy but has ample options to help prop up slowing growth.

To support economic growth, which is running near a 30-year low, the central bank is widely expected to ease policy further, although it has limited room to act due to debt, housing and inflation risks, analysts said.

The central bank has cut reserve requirements seven times since early 2018 to spur banking lending, alongside modest cuts in its new benchmark lending rates.

China needs to improve transparency and disclosure of medium- and small-sized banks following recent problems, which have pushed up risk premiums for all such banks, Zhang said.

The central bank will enhance small bank’ ability to finance small enterprises, and deepen market-oriented reforms of interest rates, so that funds can be allocated to efficient enterprises, she said.

China also needs to establish equity and bond markets for high-risk investors, she said without elaborating.

Reporting by Cheng Leng and Kevin Yao; Editing by Himani Sarkar and Sam Holmes