China fine-tunes financial policies to consolidate economic recovery

China's financial regulators are coordinating policy tools to overcome coronavirus-induced challenges and striving to alleviate short-term financial pressures for sustainable growth.

Policymakers recently announced a slew of measures to support companies and stressed policy coordination and international cooperation to combat the economic fallout of the pandemic.

"Effective policy coordination is the key to avert crisis and save the economy from slipping into a vicious circle," Yi Huiman, chairman of the China Securities Regulatory Commission, said at the Lujiazui Forum held on June 18 and 19 in Shanghai.

Yi said the synergy of monetary, fiscal and financial policies has rendered effective support to the real economy and China's capital market has also shown strong resilience.

Improvements in the mainland-Hong Kong stock connect programs and persistent financial cooperation with overseas institutions will help China further open up its capital market, Yi said, adding that the country will deepen reforms and strive to ward off financial risks.

China has strengthened monetary and fiscal policy support for the real economy to help enterprises tide over the tough time and unleash market vitality.

In addition to previous efforts like reserve ratio cuts and refinancing and re-discounting loans, China will adopt supplementary measures like guiding the reduction of loan and bond rates, issuing loans at concessional rates and lowering service charges in banking, the State Council said on June 17.

Governor of China's central bank Yi Gang said that the People's Bank of China will keep financial liquidity at a reasonable and adequate level in the second half of this year.

The country's new yuan-denominated loans are expected to reach nearly 20 trillion yuan (about $2.82 trillion) this year, marking a 19-percent expansion year-on-year, while the total amount of social financing is poised to rise 17.28 percent to over 30 trillion yuan.

Unlike the monetary measures adopted by global central banks to combat economic pressure, China's monetary support is rather restrained.

The governor pointed out that compared with a rapid expansion of the balance sheet of many major economies, the Chinese central bank's asset has been relatively stable in recent years.

"We should take into account the aftermath of policies when deciding the amount and consider in advance the appropriate timing of exit for the policy tools," he said.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said the country would not engage in a deluge of strong stimulus policies, let alone introducing monetization of the fiscal deficits or negative interest rates.

Guo also advised against the use of mass stimulus and called for coordination among different countries to create synergy in macro-policies.

"As it seems we have to live with the pandemic for a while, I suggest policymakers in other countries think twice before rolling out new stimulus measures so that we can leave some room for the future," he said.