No change in monetary policy: central bank

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A prudent monetary policy has not been changed, as this year's M2 growth target is still moderate, said Zhou Xiaochuan, governor of the People's Bank of China, at a press conference during the annual sessions of the National People's Congress and the Chinese People's Political Consultative Conference on Thursday.

Zhou Xiaochuan, governor of People's Bank of China, takes questions from journalists at home and abroad during an ongoing press conference on March 12, 2015. [Photo/China.org.cn]

Zhou said the M2, a key indicator to China's macroeconomic policy, still targets moderate growth despite certain targeted easing measures applied.

The country lowered this year's M2 growth target to 12 percent from 13 percent, said Premier Li Keqiang in his national work report to the National People's Congress, where he set the GDP growth target at about 7 percent, down from 7.5 percent in 2014.

Zhou said that the monetary tools applied by the central bank account for only a limited portion, compared with the overall size of Chinese economy.

"Adjustments to monetary policy tools have so far generally maintained moderate liquidity in the financial market," said Zhou.

"The 'new normal' is a normal state, not special, so there is no need to use a new word to explain the monetary policy," he said.

The central bank has cut benchmark interest rates twice since November. It also reduced the amount of cash that banks must hold as reserves in early February, in order to increase market liquidity and offset the increase of capital outflows.

"We should pay close attention to the prices changes when price fluctuations appear in the international commodity market. But we should be cautious and take a longer period to observe the changes."

Zhou Xiaochuan (third from right), governor of People's Bank of China, and Yi Gang (fourth from right), head of State Administration of Foreign Exchange, take questions from journalists at home and abroad during an ongoing press conference on March 12, 2015. [Photo/China.org.cn]

Yi Gang, the central bank's deputy governor, highlighted that a "proactive fiscal policy and prudent monetary policy" is the proper combination to deal with the current industrial deflation.

China's Producer Price Index has dropped for 37 consecutive months, indicating deflationary risks in the sector. The price decrease pressure is faced by the whole world when oil and other commodity prices keep failing, he said.

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