TextbyZhuoShangjin
OnFebruary6,2016,twodaysbeforethisyear鈥檚SpringFestivalbegan,thePeople鈥檚BankofChina鈥搕hecountry鈥檚centralbank鈥搃ssuedtheChinaMonetaryPolicyReportfortheFourthQuarterof2015,revealingthatthenationwillmaintainasteadyandmoderatelyrelaxedmonetarypolicywhilemakingappropriatefine-tuningandpre-emptiveadjustmenttocoordinateoveralldemandmanagementwithsupply-sidereformandcreateamoderatemonetaryenvironmentforstructuralreform.ThereportindicatesthatChina鈥檚futuremonetarypolicywillfeatureadynamicbalancebetweensupply-sidestructuralreformandcomprehensivedemandmanagement.
AttheCentralEconomicWorkConferenceinlate2015,Chineseauthoritiespledgedtodeliver鈥渟upply-sidestructuralreformwhilemoderatelyexpandingoveralldemand鈥漣n2016andbeyond.WhenaddressingasymposiumonJanuary18,2016,ChinesePresidentXiJinpingremarkedthatsupply-sidestructuralreformshouldfocusonbothsupplyanddemand,giveplaytoboththedevelopmentofproductiveforcesandtheimprovementofproductionrelations,andaligngovernmentalfunctionalitywiththedecisiveroleofthemarket.ThemonetarypolicyformulatedbyChina鈥檚centralbankforthenextphaseofdevelopmentembodiesthecountry鈥檚macroeconomicpolicyaimedatsupply-sidestructuralreform.
Currently,Chinasuffersanimbalanceinsupplyanddemand.Thissituationwaslargelycausedbypreviousmacroeconomicpoliciesthatseparatedsupplyanddemandandoveremphasizedeconomicstimulusanddemandmanagement.Supply-sidestructuralreformaimstosolveovercapacityandoversupplyinsomesectorswhileincreasingsupplyinotherneededsectors.Essentially,ittargetsunleashingthedecisiveroleofthemarketinresourceallocation.
Formulatingandimplementingmonetarypolicyisacomplicated,systematicendeavorrequiringbothsupply-sidestructuralreformandoveralldemandmanagement,whichrequiresactioninseveralaspects.
Thefirstrequirementisamoderatemonetaryandfinancialenvironmentforstructuralreformthatwillpromoteconstantandsteadyeconomicgrowth.Asoneofthenation鈥檚macroeconomicregulationbodies,thecentralbankisresponsibleforachievingadynamicbalancebetweensupplyanddemandandmaintainingcurrencyandpricestabilitythroughmonetarypolicytopromotesteadyeconomicdevelopment,increaseemployment,andbalanceinternationalpayments.Thecentralbankwillcontinueguidingcommercialbankstostrengthenliquidityandliabilitymanagement,rationallysetlimitsforliabilityandtermstructure,andenhanceliquidityriskcontrol.
Thesecondaspectisstructuralreformaimedatreducingovercapacity,destocking,deleveraging,reducingcostsandshoringupweakgrowthareasthroughdeepeningfinancialreformandinnovation.Intermsofdestocking,Chinawillurgeitsfinancialinstitutionstosupportsupply-sidestructuralreformofrealestate,upgradefinancialservicesthatcanfacilitatenew-typeurbanizationthatsupportsmigrantworkerssettlingincitiesbybuyingandrentinghouses,andabolishrestrictionsonhousingloansincitiesthathaveloosenedpurchasingrestrictions.Intermsofdeleveraging,Chinamaylooktopreferredstocksreformandreducehighdebtsoflocalgovernmentsbypushingreformoftheirfinancingmechanismsandstrengtheningtheboundarybetweenthegovernmentandenterprises.Intermsofcostreduction,theimprovementoffinancingstructuresanddropofinterestrateswillhelpenterprisescutfinancingcosts.StatisticsfromthecentralbankshowthatChineseenterprises鈥檃veragefinancingcostratiostayedat5.38percentinDecember2015,droppingby169basispointsoverthesameperiodof2014.Thenationneedstoenhancetheroleofinterestratesinloweringthefinancingcostsofenterprisesandpushingthedevelopmentoftherealeconomy,andencouragefinancialinstitutionstopromotegreenfinanceaswellasinclusivefinance.
Finally,reformandimprovementofvarioussystemsandmechanismswillunleashthedecisiveroleofthemarketinresourceallocationaswellasoptimalfunctionalityofthegovernment.Bydeepeningfinancialreformandpromotinginnovation,Chinawillfurtherhoneitsmacroeconomicregulationmodel,strengthenpriceadjustmentandconductionmechanisms,overcomeobstacleshinderingmonetarypoliciesfromsupportingtherealeconomy,andsolvemajorproblemsplaguingeconomicandfinancialoperations,enhancingtheoperationalefficiencyofthefinancialindustryanditscapacitytoservetherealeconomy.
Toenableitsmonetarypolicytoconformwithbothsupply-sidestructuralreformandoveralldemandmanagement,Chinaneedsafootholdonthepresentandaneyeonthefuture.Onlythenwillitovercomecurrentstructuralcontradictionsandalignwithlongtermeconomictrendsthroughconstantlyenhancingtheforesight,rationalityandtheeffectivenessofmonetarypolicyandfinancialregulation.
TheauthorisdirectoroftheFinancialCommentaryDepartmentofFinancialNews.