China's central bank vows stronger policy support in third-quarter report, pledging to boost demand and keep yuan stable

The People's Bank of China (PBOC) released its third-quarter monetary policy implementation report on Wednesday (11 November), vowing to step up counter-cyclical adjustments, expand domestic demand and optimise supply to strive to achieve the annual economic development goals. The report said China's economy faces challenges including a mismatch between strong supply and weak demand, structural imbalances and external shocks, and that the external environment has become “increasingly complex and volatile”.

Appropriately loose policy to continue

The central bank said it would continue to implement appropriately loose monetary policy to create a favourable monetary and financial environment for stable economic growth, adjust its policy tools in a timely manner, maintain low overall borrowing costs and keep the yuan exchange rate basically stable at a reasonable and balanced level.

The report also pledged to strengthen financial support for key areas including domestic demand, scientific and technological innovation and infrastructure projects, to enrich its policy toolkit and to safeguard the stable operations of the stock, bond and foreign exchange markets.

Policy stance as trade surplus hits record

The report comes as China's merchandise trade surplus for the first ten months of the year has passed $1 trillion, with exports up 35.2% year on year in October and imports up 41.6%. The huge surplus has kept pushing the yuan higher, with the currency up more than 5% against the dollar so far this year. Last week the PBOC announced it will raise the foreign exchange deposit reserve requirement ratio from 4% to 6% from 15 November, the first increase in nearly five years; Reuters calculated the move would withdraw about $24 billion from the financial system to slow the yuan's rally.

(File photo: headquarters of the People's Bank of China.)