25 May 2019
Premier Li has pledged adequate liquidity to ensure the stability of China's economy and financial markets. Photo: Bloomberg
Premier Li has pledged adequate liquidity to ensure the stability of China's economy and financial markets. Photo: Bloomberg

POLICY WATCH: ‘Appropriate’ liquidity promised for 2014

Premier Li Keqiang {李克強} has assured that mainland authorities will maintain liquidity at an “appropriate level” in 2014 to support the nation’s economic development and upgrade, easing market fears about tight money conditions after an apparent squeeze in recent weeks.

During a visit to Tianjin in northeastern China late last week, Li stressed that the financial sector should support the real economy. A stable economy will in turn help the financial sector grow, he said, calling for innovative financing to meet the needs of the real economy and create a win-win situation.

The government will continue to push financial structural reform to support the economic upgrade, as well as further open up various sectors, Li said on Dec. 27, while emphasizing an overall goal of maintaining financial market stability.

The premier’s remarks came after China’s money markets witnessed in December a fresh cash crunch, which observers believe was engineered intentionally by the central bank despite elevated cash demand at the end of 2013.

The People’s Bank of China’s decision not to inject cash into the system, which sent short-term interest rates higher, was seen as an effort to help curb non-stop growth in housing prices and also as a message to banks to deleverage their balance sheets. Some observers have perceived an unofficial shift to tighter monetary policy.

Li encouraged financial companies to do more to meet the needs of the real economy, as well as expand their overseas presence. Banks should provide better services for small and medium-sized enterprises, especially those that create employment, he said.

To encourage people to start their own businesses, the government will continue to streamline the administrative machinery, giving more power to the market. While reducing market intervention, authorities should exercise effective supervision, the premier said, calling for vigilance in areas such as food safety and security.

China’s economic growth is likely to come in at 7.6 percent in 2013, the State Council said in a report last week. That would be just above the government’s target of 7.5 percent growth but slightly below 2012′s figure of 7.7 percent. There are expectations that the official growth target for 2014 will be maintained at 7.5 percent.

Analysts believe growth will be supported by a steady recovery in exports, thanks to stronger demand from developed economies. A commerce ministry’s think-tank had forecast that China’s exports may expand at least 10 percent in 2014.

– Contact the reporter at [email protected]


EJ Insight writer

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