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August 5, 2015

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Central bank vows to head off risk

CHINA’S central bank yesterday promised to “stabilize financial market expectations,” saying it will head off risks in the latest demonstration of official resolve to keep the economy on an even keel.

Without referring to the shakeout in the country’s stock market, which has slumped about a quarter since early June, the People’s Bank of China said it would improve its warning system for risk.

Authorities will “pay attention to stabilizing financial market expectations,” the bank said in an online statement after Governor Zhou Xiaochuan met the heads of its provincial offices.

It was not immediately clear whose expectations it wants to stabilize or how it would do it, but the comment followed the slump in the market and drastic measures to stop the sell-off.

The central bank will use various policy tools flexibly to sustain appropriate growth in liquidity and credit and keep policy “prudent,” the statement said.

It will also aim to lower borrowing costs for companies, and support key areas and vulnerable sectors, while keeping the yuan “basically stable” as it tries to refine the exchange rate system, it said.

Chinese shares were seized by a vicious sell-off in June and July after speculation that the central bank had ended its monetary policy easing spurred investors to dump their stocks.

To halt the stampede out of the market, authorities took measures that included barring some investors from selling their shares, and mobilizing the country’s top 21 brokerages to buy stocks.




 

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