China central bank says RRR cuts, other policy tools need to be used flexibly

BEIJING : Reserve requirement ratio (RRR) cuts, open market operations and all structural monetary policy tools need to be used flexibly to ensure reasonably ample liquidity in the banking system, an official with China’s central bank said on Friday.

The central bank will guide banks to effectively adjust interest rates on outstanding mortgages and support banks to reasonably control cost of liabilities, Zou Lan, head of the monetary policy department at the People’s Bank of China (PBOC), told a press conference in Beijing.

The PBOC will strengthen counter-cyclical conditions and policy reserves and ramp up macro adjustments, according to Zou.

Zou said the central bank will reasonably manage the level of interest rates to prevent capital arbitrage, and prevent the “empty circulation” of funds – or liquidity being stuck in the banking system.

Zou also said the central bank will guide banks to effectively adjust mortgage interest rates and support banks to reasonably control cost of liabilities.

Authorities are studying a batch of policy reserve measures with greater intensity, Yuan Da, head of the department of national economy at the National Development and Reform Commission (NDRC), told the presser. No details were given.