China adopts normal monetary policy as long as possible

Photo taken on March 13, 2018 shows the headquarters of the People's Bank of China in Beijing, capital of China. [Photo/Xinhua]

By keeping its monetary policy prudent and within a normal range, China has been one of the few major economies in the world adopting normal monetary policy, China's central bank governor said.

Keeping a normal monetary policy, positive interest rates as well as upward yield curve is generally conducive to the sustainable economic and social development, Yi Gang, governor of the People's Bank of China (PBOC) wrote in an article published in the China Finance, a PBOC-affiliated magazine.

That also helps provide positive incentives for economic entities and maintain the global competitiveness of the yuan-denominate assets, Yi said.

Yi noted that the major developed economies have continuously adopted the ultra-low interest rates and quantitative easing since the 2008 international financial crisis and started to implement the policy of unlimited quantitative easing to cope with the COVID-19 pandemic.

While keeping its balance sheet stable, the PBOC has also maintained growth of effective credit loans, Yi said, adding that the average required reserve ratio for commercial banks has been lowered from 15 percent to about 9 percent since 2018.

Besides, the central bank has smoothed the transmission mechanism of monetary policy through reform and marketized means, leading to a reasonable increase in money supply and social financing.

The financial sector's support for the real economy, especially the manufacturing sector as well as medium and small firms has been further beefed up, he said.