Stronger, more targeted monetary support to accelerate China's economic recovery

China's prudent monetary policy will be more targeted and effective this year to provide stronger support for the overall recovery and improvement of its economy, according to financial officials and experts.

In a statement released after the latest quarterly meeting of its monetary policy committee, the People's Bank of China (PBOC), the country's central bank, has pledged to strengthen its implementation of the prudent monetary policy and provide stronger support for the real economy.

The central bank said it will work to maintain liquidity at a reasonably ample level, maintain effective growth in total credit volume, and ensure that increases in money supply and aggregate financing are generally in step with nominal economic growth.

Liang Si, a researcher at the Bank of China's research institute, said that considering lingering pressure, the monetary and financial environment for the real economy will remain stable and appropriate this year. He expected M2 and social financing to both maintain double-digit growth.

Newly added social financing, a measurement of funds that individuals and non-financial firms receive from the financial system, came in at nearly 30.5 trillion yuan (about 4.47 trillion U.S. dollars) in the first eleven months of 2022, central bank data shows.

Liang said he believes domestic banks' loan interest rates will continue to decrease to boost enterprises' vitality. He noted that the PBOC has pledged to lower corporate financing costs in 2023, and external pressure from the U.S. Fed's rate hikes is likely to ease.

In addition to ample liquidity and lower rates, China's monetary policy in 2023 is also expected to be more targeted, with emphasis on key fields and weak links in the economy.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, has highlighted expanding effective demand and deepening supply-side reform as focuses of the country's monetary policy in 2023.

Converting the current total income into consumption and investment to the maximum extent possible is the key to faster economic recovery and high-quality growth, and financial services have a lot to offer in the process, Guo said in an interview with Xinhua.

Guo pledged to tilt monetary policy toward private enterprises, with measures to maintain the effective growth of total credit and lower overall financing costs.

Ren Tao, a researcher at China's National Institution for Finance and Development, said that bank credit will continue to be channeled into modern sectors such as advanced manufacturing and strategic emerging industries, and sectors that facilitate domestic demand, such as the auto and green appliances industries, will attract such funds as well.

Ren said financing demand related to the real estate sector this year will be unlocked to some extent, with specific support to be given to secure the delivery of pre-sold housing, and loans for mergers and acquisitions in the real estate sector will rise.

In his interview, Guo also stressed the need to promote healthy circulation between the real estate and financial sectors.

China will make efforts to ensure the delivery of pre-sold housing, focus on improving the balance sheets of leading real estate developers, and seek to promote the property industry's transition to new development models, Guo noted.