(Yicai Global) June 28 -- China’s monetary policy will remain focused on the broad, overall framework in the second half and at the same time will also wield structural tools to provide targeted support to specific areas such as smaller enterprises and the green transformation, Yi Gang, governor of China’s central bank, said yesterday.

Structural monetary tools can serve as both overall regulation and specific regulation, Chen Yulu, deputy governor of the People’s Bank of China, said four days ago, adding that such instruments can achieve policy impact more precisely. It is the first time that the central bank has responded to market concerns about whether the excessive use of structural tools will weaken broader monetary policy.

The central bank will take ‘appropriate measures’ to address the most urgent needs at different stages of economic development, Chen added.

The PBOC introduced a new round of monetary easing in the first half to underpin the economy as economic growth comes under increasing pressure due to the recent outbreaks of Covid-19 across the country.

Loosening measures included a 0.25 percentage point cut in the reserve requirement ratio for banks, a CNY800 billion (USD119.6 billion) profit payment to the central government, equivalent to a 0.4 percentage point RRR cut, and two reductions in the loan prime rate, the benchmark lending rate. These were a 10 basis points decrease for the one-year LPR and a lowering of 20 basis points for the five-year LPR.

These cuts have had a positive effect on ‘stabilizing growth’ but policies need to be tailored according to the stage of economic recovery and the needs of the real economy, said Wen Bin, chief economist at China Minsheng Bank.

The central bank also rolled out a number of structural instruments in the first six months, such as the introduction of special refinancing for science and technology innovations, all-inclusive elderly care services and CNY100 billion (USD15 billion) of new refinancing to support the clean and efficient use of coal.

In the second half, the central bank will continue to promote credit growth and social financing to boost liquidity and mitigate the impact of the latest waves of Covid-19, said Li Chao, chief economist at Zheshang Securities. The government is likely to inject CNY22 trillion (USD3.2 trillion) in credit this year, a jump of 11.4 percent from the year before.

There could be nearly CNY1.3 trillion in refinancing quotas and additional discounts to support agricultural and small-scale enterprises this year, said Ming Ming, chief economist at CITIC Securities.

Editor: Kim Taylor