Jin Guanping: China's monetary policy will still be "self oriented"

On June 15 local time, the Federal Reserve announced an interest rate increase of 75 basis points, the largest single rate increase since 1994. Since the beginning of this year, global energy and food prices have risen, and inflation has made a comeback, which has become a difficult problem for central banks. Many central banks have started or accelerated the process of raising interest rates. In order to curb inflation, increasing the range of interest rate increase has become its inevitable choice, and the market has long expected it.
After the Federal Reserve raised interest rates, the Bank of England announced a 25 basis point increase in interest rates, the fifth increase since December last year. The Swiss central bank raised interest rates for the first time in seven years. In the context of interest rate hikes by many central banks, how to adjust China's monetary policy has become the focus of attention.
The adjustment of monetary policies in the United States and Europe is based on the changes in the economic situation they face. China and the United States are in different economic cycles, which determines that China's monetary policy does not need to follow the operation. At present, China's price level is far lower than that of major economies such as the United States and Europe. According to the latest price data, China's CPI growth was flat, PPI decline accelerated, and the overall inflation level was controllable. In the second half of this year, China's CPI will continue to operate within a reasonable range and achieve the expected target of about 3% for the whole year. Although geopolitical conflicts are still disturbing the international energy and food markets, China has sufficient food supply, coal resources can meet the demand, and the policy of ensuring supply and stabilizing prices continues to work. Under the premise of moderate and controllable inflation, China has enough room for monetary policy and does not need to follow other countries to increase interest rates.
Historically, the adjustment of the Federal Reserve's monetary policy will have spillover effects on the world, especially in emerging economies. Generally speaking, when the monetary policy of the Federal Reserve moves towards easing, the liquidity of emerging economies will increase and the value of money will increase, and asset prices will rise accordingly; Conversely, when the Federal Reserve turns to tightening monetary policy, emerging economies may experience a contraction process, resulting in capital outflows, financial market shocks, currency devaluations, asset price declines, etc. For an economy with unstable economic fundamentals, it may even trigger a financial crisis.
In the face of the Fed's interest rate hike, China has the ability and confidence to cope with changes in the external environment. At present, China's economy has entered a high-quality development stage, and the advantages of industrial chain supply chain are more prominent. The financial market has been steadily opened to the outside world, the RMB exchange rate formation mechanism has been continuously improved, and the stability of cross-border capital flows has been significantly enhanced, which can better cope with changes in the external environment. China's economy is resilient, and its long-term fundamentals have not changed. These factors are enough to support China in coping with external disturbances. According to the latest data, since May, industrial production has changed from decline to increase, the decline of service industry production index has narrowed, and market sales have recovered. Positive changes in economic operation have helped to enhance market confidence and improve market expectations.
In the face of the current economic situation, China's monetary policy still needs to adhere to the principle of "focusing on itself", strengthen the implementation of prudent monetary policy, and provide more powerful support for the real economy. We should cherish the current time window when inflation is relatively mild and the constraints of tightening policies in developed countries are small, and promote the early steady growth policies to speed up the implementation and take effect. Monetary policy should continue to play the dual functions of aggregate and structure, implement various financial policies and measures to stabilize enterprises and ensure employment, and focus on supporting small and micro enterprises and difficult industries. We will make good use of various monetary policy instruments, maintain reasonable and sufficient liquidity, enhance the stability of the growth of total credit, and keep the growth of money supply and social financing basically matching the growth of the economy. At the same time, we should also take into account internal and external balance, pay close attention to the adjustment of monetary policies in major developed economies, pay close attention to the changes in price trends, support the production and supply of grain and energy, prevent the risk of imported inflation, and maintain the overall stability of prices.