BEIJING: China is expected to maintain a neutral monetary policy in the second quarter, as stronger investment will lead to a solid economic recovery, while there should be additional risk-control efforts, economists said.
With consumption continuing to recover and exports remaining strong, the world’s second-largest economy is expected to maintain robust GDP growth in the second quarter. Investment in the manufacturing industry may rebound, following a recovery of industrial profit growth, they said.
A senior official from the central bank, the People’s Bank of China, stressed last week the importance of boosting lending to the manufacturing sector. Measures will guide financial institutions to raise medium to long-term loans and maintain reasonable growth of credit to manufacturers, especially high-tech firms, said Zou Lan, head of the central bank’s financial market department.
China’s manufacturing purchasing managers index increased to a stronger-than-expected 51.9 in March, up from 50.6 in February. Some indicators of inflationary pressure, especially producer price inflation, are on the rise due to a global boom in commodity prices and the domestic antipollution measures in northern China, said Lu Ting, chief China economist at Nomura Securities.
A higher reading of the leading indicators of economic performance may give a boost to market sentiment. But the latest economic data won’t have a material impact on policymaking and the central government will stick to its “no sharp shift” stance, Lu said.
The latest public speech in late March by Yi Gang, the central bank governor, pledged that China will continue to conduct a “normal” monetary policy and maintain its consistency, stability and sustainability.
“China still has space in terms of providing liquidity and moderating interest rates,” Yi said, adding that the monetary policy should strike a good balance between supporting growth and preventing risks.
The broad money supply, or M2, is growing at 10 percent currently, and the pace is in line with nominal GDP growth. The 10-year treasury bond yield is around 3.2 percent, and the seven-day reverse repo rate, one of the central bank’s policy rates, is at about 2.2 percent.
– The Daily Mail-China Daily News exchange item
