Winton Dong

dht0620@126.com

THE People’s Bank of China (PBOC) on Aug. 17 injected a net amount of 300 billion yuan (US$43.3 billion) in medium-lending facility loans into the economy.

Such a new injection suggests that while preventing excessive money from spilling into the financial system and avoiding the “flood irrigation type” of monetary easing, the Chinese central bank has no strong intention of tightening its monetary policy. It also emphasizes that maintaining a flexible mechanism and liquidity at a reasonable and ample level is of great significance in present China.

Monetary easing is a common practice all over the world to tide over financial difficulties and crises. During the past several months of this year, the U.S. Federal Government issued more than US$3,000 billion worth of national debts and also witnessed a remarkable increase in the total assets of the Federal Reserve or broad money. That is the main reason why the price of gold has set record highs and recently soared to US$2,000 per ounce. The present global credit system is based on the U.S. dollar. When the dollar weakens and has less appeal, gold gains in value, plays the role of credit currency and serves as safe haven for investment instead.

In terms of monetary easing, China is no exception, especially during the ravaging period of the COVID-19 pandemic. China’s economic data in July provided more indications of recovery, although consumer consumption still lagged behind. However, this recovery process is still heavily relying on governmental policy support and financial stimulations.

Top Chinese officials have realized the side effects of uncontrolled monetary easing. In a recent article published in Qiushi magazine, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, stressed the importance of guarding against financial risks, especially because the novel coronavirus pandemic has brought about great uncertainties to the external market. China has basically controlled the virus at home, which greatly helped it gain a 3.2 percent GDP growth in the second quarter. However, the United States’ GDP declined by 32.9 percent during the same period, making our external risks a serious issue.

Sudden infection clusters and sporadic resurgence of the novel coronavirus cannot be totally ruled out in China. To cope with such emergencies, as well as the worsening international environment and global economic recession, monetary tightening may be less likely in China in the near future. But at least, Chinese monetary authorities can take more innovative and precise measures to channel liquidity into weak and nonfinancial sectors, so as to avoid the flood of money and keep our financing more targeted and efficient.

Chinese regulatory authorities have called for further reform of the loan prime rate (LPR) procedures and the reduction of real lending rates. Since the start of the pandemic, the PBOC has already brought down the LPR by 0.3 percentage points to 3.85 percent. The central bank is also trying to develop financial tool kits that increase access to credit and lower borrowing costs for the real economy, especially small and medium-sized enterprises that are more vulnerable to uncertainties and financial attacks.

In order to set the protection of market players as a top priority, governments at various levels should further cut tax and fees for service sectors such as catering, accommodation, tourism and exhibition, which have been bitterly shattered by the pandemic, so as to help enterprises return to a normal track and pave the way for the country’s continued economic recovery and growth.

More measures should also be taken to channel capital for the development of the digital economy and the construction of new infrastructure, which focuses on the Internet, Internet of Things, Smart City, 5G communication and other emerging industries. When more money is shifted to these rising industries, financial risks in traditional industries and enterprises will also be reduced.

(The author is the editor-in-chief of Shenzhen Daily with a Ph.D. from the Journalism and Communication School of Wuhan University.)