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Plenty room to ease curbs on lending, says bank chief

By Feng Jianmin (Shanghai Daily)

09:26, March 13, 2012

China has plenty of room to ease curbs on lending when necessary and will continue to make monetary policies and the yuan more flexible, central bank officials said yesterday.

Zhou Xiaochuan, governor of the People's Bank of China, said that changes in the reserve requirement for commercial banks were not a direct signal of change in monetary policies. They were decided by the amount of market liquidity related to the capital flow of foreign currencies.

"There is a lot of room for reserve requirement cuts," Zhou told a press conference on the sidelines of the annual session of China's top legislature. "But we need to look at whether it's necessary, and look at market liquidity."

He said Europe is currently the single biggest source of uncertainty in international markets, and China will take both global and domestic factors into account when deciding timing for a change in reserve requirements or interest rates.

Zhou said the central bank introduced more flexible measures last year to ensure credit supply while keeping the tone of monetary policies prudent.

He pledged to proceed with reform of exchange rates and interest rates to enhance domestic consumption, to encourage imports, and to balance international capital flow into China.

China reported a trade deficit of US$31.5 billion last month, the first since February 2011 and the biggest in at least a decade. A trade deficit in the first two months of this year and its impact on the exchange rate of the yuan was "a good thing" for China, Zhou said.

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