22:08 GMT12 April 2021
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    China's central bankers are touting the further opening up of the nation's financial sector, and have reiterated the sustainability and good health of the Chinese economy; however, experts have struggled to determine what steps policymakers will take over the coming few months.

    Kristian Rouz — The People's Bank of China (PBOC) says the nation's economy has shown signs of improvement in the first quarter, defying fears of an ongoing slowdown. Officials have highlighted a rebound in real estate prices across China's urban areas, as well as an uptick in lending, which could, in turn, energise the mainland's business activity later this year.

    In a statement Monday, the PBOC said China's economy remains sustainable and healthy despite mounting international risks, including trade tensions, the slowing demand for Chinese-made goods overseas, and an overall cooling of the global economy.

    The PBOC reiterated its commitment to keeping monetary policies stable this year, which likely suggests that the central bank will abstain from cutting rates or buying private-sector bonds on a large scale. Officials also said they would not print money and will control excessive money supply, in order to curb inflation and keep the renminbi's FX rate in check.

    "The (Chinese) economy has shown healthy development and economic growth is resilient," the PBOC said in a statement during its first-quarter meeting on monetary policy.

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    According to the government data, China's loan issuance and exports posted a solid rebound last month, contributing to the steady economic expansion at the end of the first quarter. This bounceback, however, comes after the PBOC cut its reserve requirement ratios (RRRs) for commercial lender at least five times since the second half of last year.

    The PBOC didn't mention if it would undertake further RRR cuts later this year, although it vaguely said it would not implement substantial stimulus measures.

    Meanwhile, China's real estate sector has shown signs of recovery over the same period. In March, new home prices, excluding government-subsidised properties, rose 0.61 percent month-on-month, ending a four-month period of depreciation.

    The recovery, however, was more prominent in the so-called 'tier 2' and 'tier 3' cities — which are smaller and less industrially-advanced metropolitan areas, such as Dandong and Jinzhou.

    In such cities, local governments have taken quiet measures to support the demand for housing, which could technically be considered informal government subsidies, despite not being registered as such from the standpoint of official statistics.

    The PBOC, for its part, also said it is now less concerned about the possible negative developments in the global economy. The statement could have been motivated by the limited progress achieved in trade talks with the US, but PBOC officials also expressed optimism over their new round of reforms to make the Chinese economy more efficient and sustainable.

    "The importance of risk prevention will likely rise and there may be small policy tweaks," Zhang Wenlang of Everbright Securities Cot Ltd. said.

    The PBOC touted upcoming interest-rates reform, which could change its approach to policy-setting. Central bankers also vowed to provide further support to credit expansion, which, however, they said, should not outpace GDP growth.

    China's central bank also reiterated its commitment to implementing more reforms to open up the Chinese financial sector, by easing restrictions on the inbound and outbound flows of investment.

    The PBOC's statement was deemed slightly contradictory by some economists, who said they now struggle to pinpoint the near-term outlook on central bank policy.

    Chinese central bankers may be "shifting between a tightening and easing bias" in the coming few months, Ming Ming of Citic Securities Co Ltd. said.

    The PBOC is set to release its full report on first quarter GDP and other macroeconomic figures this coming Wednesday. 


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