US financial policy change unlikely to impact China’s market: central bank official

Changes in US Federal Reserve's monetary policies are unlikely to have a big impact on China's financial market, an official from the People's Bank of China, the country's central bank, said on Tuesday, pledging no reversal in the country's prudent monetary policy.

There has been some discussion in the markets about the US Fed's monetary policy tightening. In China, the 10-year Treasury bond rate stands at about 3 percent, down from recent levels, while the yuan's exchange rate continues to fluctuate in both directions up and down, while the financial market is operating steadily, Sun Guofeng, head of the monetary policy department at the People's Bank of China (PBC), told reporters in Beijing on Tuesday.

Sun said that the Fed's policy changes will have a limited impact on China's monetary policy and financial markets, and the PBC will maintain China-centric international macro policy coordination.

The PBC official dismissed speculation that there might be a deviation from a prudent monetary policy in the wake of a Friday announcement that China will lower the reserve requirement ratio (RRR) by 50 basis points for all commercial lenders.

The RRR cut, effective Thursday, is set to inject around 1 trillion yuan ($154.62 billion) worth of long-term liquidity into the economy, per the PBC.

"The RRR reduction is a conventional liquidity operation as the monetary policy normalizes and the prudent monetary policy stance has not changed," Sun said.

The country has maintained a prudent monetary policy since 2020, offering vigorous support to the real economy without resorting to flood-like stimulus. China has carefully aligned monetary policy with domestic virus prevention and containment efforts, according to Sun.

Monetary policy played a part in responding to the economic fallout of the COVID-19 pandemic during the February-April period last year before returning to normal in May 2020, he said.

The country's monetary policy has basically returned to its pre-coronavirus normalcy, and it maintained a leading role in global macro policy in the first half of the year, the official said.

Since the containment of the virus and recovery from the pandemic vary in terms of time, it's normal for US monetary policy to differ from China, the PBC official said, vowing to stick to a normal monetary policy and maintain policy independence.