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Global financial markets have been buzzing over whether China is
shifting to a more cautious policy stance since an article in
the People's Daily early this month.
The article quoted an "authoritative person" as saying China may
suffer a financial crisis or recession if the government relies
too much on debt-fuelled stimulus to boost flagging economic
growth.
"It's objective and appropriate to keep China's monetary policy
generally prudent with slight loosening," the report on Thursday
said.
"China's economic growth remains within a reasonable range, but
the economy faces relatively big downward pressure," it said.
Monetary policy should still be counter-cyclical, it said.
The central bank has said previously it will maintain prudent
monetary policy with a loosening bias.
The report also said the PBOC will create a neutral and
appropriate monetary and financial environment for reforms.
Growth of China's broad M2 money supply is likely to slow in the
coming months, it added, noting the central bank had to inject
liquidity after a stock market crash last summer to prevent
financial risks.
China's new bank loans hit a record high in the first quarter,
but loans in April were much lower than expected, adding to
fears that Beijing was taking a more cautious approach on
stimulus.
But most analysts believe continued fiscal and monetary support
is needed because the economy is not yet on a firm footing.
Indeed, in the weeks since the People's Daily article, media
have reported a steady stream of major infrastructure projects.
(Reporting by Beijing Monitoring Desk and Kevin Yao; Editing by
Kim Coghill)
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