Funds for the real economy in pipeline

China will strengthen financial support measures for the real economy in the coming year by fostering steady credit expansion and launching more targeted policy aids for key sectors such as small businesses, said Yi Gang, governor of the People's Bank of China, the central bank.

The PBOC will promote steady growth in loans and money supply and will ramp up targeted financial support for small and micro enterprises, technological innovation and green development next year, Yi said in an interview with Xinhua News Agency that was published on Tuesday.

The average interest rate of corporate loans has dropped to a record low of below 5 percent this year, and the PBOC will promote further declines in comprehensive corporate financing costs in 2022 while keeping them at an overall stable level, Yi told Xinhua.

Direct policy tools will be used to boost loans to small and micro businesses, Yi said, adding that the targeted tools to support carbon reduction launched in November are expected to release the first batch of funds to financial institutions by the end of this year.

The central bank governor added that the country's financial system has remained stable as overall financial risks are tapering and controllable, with the rise in the macroeconomic leveraging ratio effectively curbed and market expectations over the property market gradually brightening.

At a meeting held on Monday that mapped out priorities for the central bank in 2022, officials also noted the importance of strengthening the stability of credit growth and amplifying support for the real economy, according to a PBOC statement released on Monday.

Experts said the possibility of the PBOC further reducing interest rates and banks' reserve requirement ratio next year has risen amid such increasing signals of policy support and economic headwinds.

Zhong Zhengsheng, chief economist at Ping An Securities, said there remains room for the central bank to cut the RRR by 1 to 1.5 percentage points next year to stabilize money supply growth, while interest rates may be lowered if economic sentiment sours.

It is feasible for the PBOC to roll out easing measures despite the foreseen interest rate hikes by the US Federal Reserve, Zhong said. The yield spread between Chinese and US government bonds has remained as high as 1.4 percentage points of late, providing a cushion for any capital outflow pressure on China due to the divergence in the two economies' monetary stances.

According to the PBOC statement on Monday, the central bank will also improve supervision over platform companies and capital, better meet reasonable housing demand from homebuyers and advance pilots of digital renminbi research and development in an orderly manner next year.

Efforts will be made to promote financial opening-up, increase the flexibility of the renminbi, enhance capital account convertibility and push ahead international cooperation in green finance, the statement said.

The State Administration of Foreign Exchange also said in a statement on Monday that it will take deepening reform and opening-up measures in the field of foreign exchange as one of its key tasks for 2022. The administration will advance the pilot programs that facilitate cross-border investments by private equity funds and optimize services regarding foreign exchange with a focus on small and medium-sized exporters and importers, the statement said.