People’s Bank of China (PBOC) the central bank of China proposed that they are able to keep their annual economic growth at 6-7 per cent over the next three to five years as they cut the bank interest rates for the sixth time in less than a year. Yi Gang, vice governor of the People’s Bank of China said that Chinese economy is “new normal” as even they are in a slower pace for two decades but its growth is faster than other major economies in the world.
PBOC also lowered the amount which the banks must hold as reserves. The monetary policy of the world’s second-largest economy was aggressive since the 2008/09 financial crisis.Yi added that China would lower their reserve requirement ratio(RRR) for banks and the amount of cash that the money lenders needs to keep on hand – at a “normal” pace.
PBOC has also planned to keep interest rates at a reasonable level so as to reduce the corporate debt burden. These interest rate liberalization does not mean that the central bank would reduce regulation of rates.
China will continue to set a benchmark in lending and deposit rates but these rates will not restrict its market pricing. The data which was recently released revealed that the growth rate in Chinese economy from July-to-September quarter is 6.9 per cent and has gone below 7 per cent for the first time since the global financial crisis.
Yi noted that the China’s stock market also has fallen sharply since June. It had also made adjustments and Yuan, the Chinese currency was devalued in early August. Their actual intention was to make market reforms but due to the relative big depreciation pressure on the Yuan they have decided to stabilize the Yuan.
The PBOC was planning to leverage their levels in the debt market .China has exceptionally high debt levels, and the banks was not overly anxious about cutting the level of leverage in the economy.