China will step up use of structural monetary tools to help out suffering market players and cushion economic headwinds in a targeted manner while avoiding significant fluctuations in cross-border capital flows, officials and experts said.
Chen Yulu, vice-governor of the People's Bank of China, said the central bank will put stabilizing economic growth in a more prominent position and better employ the role of monetary policy in beefing up support for the real economy.
All-out efforts will be made to help suffering market players withstand difficulties, including rolling out a relending facility with a quota of 100 billion yuan ($14.86 billion) as soon as possible to support transportation and warehousing companies, Chen said in an interview with Xinhua News Agency published on May 7.
The country will support those severely affected by COVID-19 outbreaks to extend loan repayments and speed up the development of credit loans and movable asset-pledged loans to hard-hit companies such as those in the catering, cultural and travel sectors, he said.
Chen added that the PBOC will strengthen support for banks to issue perpetual bonds that will enhance their lending capacity and promote fee reductions by financial institutions to alleviate burdens on enterprises and individuals.
"The host of targeted measures supportive of companies and individuals hard hit by the COVID-19 surge will make it easier for them to procure financing, reduce their financing costs and help them overcome current difficulties," said Wen Bin, chief researcher at China Minsheng Bank.
The measures come amid China's ratcheted-up use of monetary tools. Since April, the PBOC has launched two targeted relending facilities aimed at technological innovation and eldercare services, and increased the quota of a relending facility by 100 billion yuan to support the use and reserves of coal.
The PBOC will give play to the role of monetary policy on both aggregate and structural fronts, proactively ramp up the use of structural monetary tools and increase the quota of relending facilities for the agricultural sector and small businesses at a proper time, the central bank's first-quarter monetary policy report said on May 9.
Also in favor of structural tools, the PBOC said in an article on May 6 that structural monetary instruments have a "unique advantage" of accurately boosting credit expansion in weak links of the economy and are conducive to maintaining ample liquidity levels.
Experts said recent developments signaled that structural tools might dominate China's monetary policy support in the short term, which will help alleviate downward pressure without significantly amplifying the pressure facing cross-border capital flows amid tightening US monetary policy.
Speaking of the spillover effect of monetary tightening in developed economies, Chen, the central bank vice-governor, said China is able to cope with the effect given the country's steady recovery pace, controllable inflationary pressure and optimized economic structures.
Yang Haiping, a researcher at the Central University of Finance and Economics' Institute of Securities and Futures, said structural monetary tools, instead of aggregate ones such as universal interest rate cuts, could be the focus of monetary policy in the short term given relatively ample liquidity at home and the external pressure of US tightening.
Yang said he expects the country to make structural monetary facilities available to a larger scope of financial institutions and regions, adding that it is possible for more structural tools to be unveiled.
The onshore yuan exchange rate against the US dollar dropped to 6.73 on the afternoon of May 9, the lowest level since November 2020－weakening by more than 400 basis points from Friday's close.
Due to a strengthening US dollar and falling prices of global financial assets, China's foreign exchange reserves also dipped to $3.1197 trillion as of the end of April, down $68.3 billion or 2.14 percent from a month earlier, the State Administration of Foreign Exchange said on May 7.
