China’s authorities are concerned about the swelling national debt. The top priority for China’s government is to ensure that the huge debt does not smash the national economy. According to Reuters’ estimates, China's total debt currently exceeds 300% of GDP. Analysts expect this figure to snowball. Meanwhile, the People's Bank of China (PBOC) intends to ease its monetary policy and is poised to follow this course if appropriate, Xuán Chángnèn, Deputy Governor of the PBOC, stated.
"China's stance on an adequate and accommodative monetary policy remains unchanged. Moreover, there is plenty of room for maneuver in the monetary strategy," Xuán Chángnèn added.
According to the official, the current M2 (money supply) ratio to GDP has exceeded 200%, and the macroeconomic credit leverage ratio is 300%. The fact that both metrics continue to rise is a cause for concern.
In Xuán Chángnèn’s opinion, the PBOC may lower the reserve requirement ratio and interest rates in the near future. However, this will happen "at the appropriate time, depending on domestic and international economic and financial conditions, as well as the state of financial markets."
Central banks around the world are facing large-scale uncertainty amid geopolitical upheavals, deglobalization, and high volatility. Many analysts expect the PBOC, which has kept key interest rates and reserve requirements unchanged in recent months, to go ahead with its monetary policy easing. The Chinese regulator will adjust its future policy decisions to the fallout of how US tariffs will affect the Chinese economy.
