China won't join money-printing party: PBOC governor

(ECNS) - China will not join the money printing party and will maintain its prudent monetary policy, central bank governor Zhou Xiaochuan has said, according to the overseas edition of the People's Daily on Wednesday.

So far, more than 10 countries in Europe, Asia and the Americas have joined the money printing "party." The European Central Bank (ECB) launched its "quantitative easing" (QE) campaign by kicking off a landmark government bond buying program on March 9. Japan's central bank decided in mid-March that it will continue its QE policy. South Korea also surprised its Asian neighbors with an unexpected announcement of interest rate cuts. 

Those QE campaigns, together with moves by China's central bank, the People's Bank of China (PBOC), to inject liquidity into the open market, have stirred market speculation that China may follow suit.

But Zhou said that "The prudent monetary policy under the economic new normal will support economic growth and also help push ahead with structural reforms. A policy that is too loose will harm structural reforms."

Since the end of last year, China's economy has been under increasing downward pressure with deflation risks. As a result, the PBOC has rolled out a series of measures addressing liquidity and credit management, including cuts of interest rates and reserve requirement ratios.

Zhou said the rate for China's credit expansion, or money supply expansion, is probably two to three percentage points higher than the nominal GDP expansion, which is significantly lower than that during a stimulation period. Therefore the current monetary policy remains fairly prudent.

The PBOC has also promised a prudent monetary policy for China in 2015, saying more attention will be given to small adjustments at a proper time.

Gao Yuwei, a researcher with Bank of China, suggested that China should moderately ease its monetary policy in the coming months to avoid further slowdown in money supply, and create a good financing environment for investment growth.

On the other hand, China should take measures to reduce financing costs and ease interest burdens on the real economy, while paying close attention to asset prices to guard against bubbles, Gao told the newspaper.