China will not change prudent monetary policy: Premier Li

February 20, 2019

BEIJING (Reuters) – China has not and will not change its prudent monetary policy and will not resort to “flood-like” stimulus, Premier Li Keqiang said on Wednesday.

Market speculation is growing over whether authorities will take more aggressive policy steps after recent weak data.

“I reiterate that the prudent monetary policy has not changed and will not change. We are determined not to engage in ‘flood-like’ stimulus,” Li said at a cabinet meeting, according to a statement on the government’s website.

A cut in banks’ reserve requirement ratio (RRR) in January reflected ample room for such reductions, Li said.

China slashed RRR by 100 basis points in January – its fifth cut in the past year – as it looks to reduce the risk of a sharper slowdown in the world’s second-biggest economy. Further reductions are widely expected.

China’s banks doled out a record 3.23 trillion yuan ($480.43 billion) in new loans in January while several other key credit gauges also picked up modestly that month in response to recent policy easing steps.

Rising bill financing and short-term loans could lead to “arbitrage” activities and create potential risks, he added.

Financial institutions should offer more credit, especially medium- and long-term loans to small firms, he said.

Li also said the government needed to deepen reform to resolve long-term problems in the economy.

(Reporting by Kevin Yao and Beijing Monitoring Desk; Editing by Kim Coghill, Robert Birsel)

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