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China's monetary policy to be more prudent, says central bank assistant governor

BEIJING: China's monetary policy is expected to be more prudent and neutral in order to rein in asset bubbles and guard against financial risks, economists have said.

The central bank, the People's Bank of China (PBOC), raised the interest rate for seven-day repurchase agreements, a key tool used to adjust monetary policy, and for longer 14- and 28-day repo rates.

Last month, the PBOC also raised rates on its medium-term loan facility for the first time since it debuted the facility in 2014.

Monetary policy has been slightly loosened due to downward pressure on economic growth, according to PBOC assistant governor Zhang Xiaohui.

Top policy makers said at the annual Central Economic Work Conference in December that China would maintain a "prudent and neutral" monetary policy in 2017.

In an article published on Friday in China Finance, a PBOC-run financial magazine, Ms Zhang described the monetary policy for 2017 as "more neutral" and "more prudent".

"China should keep its monetary policy prudent and stable, appropriately expand aggregate demand to avoid an overly-rapid economic slowdown and at the same time refrain from excessive money supply to prevent bubbles," she said.

Bank of Communications chief economist Lian Ping said: "The relatively easy monetary policy environment created by cuts to benchmark interest rates and reserve requirement ratios since late 2014 has changed.

"Monetary policy is currently shifting toward prudence while tilting to slight tightening, a trend that has become more and more clear since the second half of 2016," Mr Lian added.

China International Capital Corporation (CICC), a Beijing-based investment bank, said the authorities were turning their focus to "curbing asset bubbles and guarding against economic and financial risks".

At the Central Economic Work Conference in December, the Chinese leadership pledged to make a priority of preventing financial risks.Mr Lian said the central bank would be "very cautious" in changing monetary policy, adding that the PBOC would look at reactions in the domestic financial market and the real economy. - XINHUA

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