China’s central bank chief prepares to hold press conference days after Fed rate cut

BEIJING — People’s Bank of China Governor Pan Gongsheng is scheduled to speak to reporters on Tuesday, along with two other financial regulatory chiefs.

The relatively rare high-level press conference was scheduled after the US Federal Reserve cut interest rates last week. This has triggered an easing cycle that theoretically gives China’s central bank more room to cut rates and boost growth in the face of deflationary pressure.

Pan became PBOC governor in July 2023. During his first press conference as central bank governor in January, Pan said the PBOC would reduce the amount of cash banks must hold on hand, known as reserve requirement ratio or RRR. Such policy announcements are rarely made during such events and are usually disseminated through online communications and state media.

He then told reporters in March on the sidelines of China’s annual parliamentary meeting that there was room to cut the RRR further. Such a reduction is widely expected in the coming months.

Unlike the Fed’s focus on one main interest rate, the PBOC uses a variety of rates to manage monetary policy. On Friday, the PBOC did not change its base lending rate, a benchmark that affects corporate and household borrowing, including mortgages.

China’s system of government also means policy is set at a much higher level than the financial regulators who spoke on Tuesday. Such high-level meetings in July called for efforts to meet full-year growth targets and boost domestic demand.

While the PBOC kept its key lending rate unchanged in the days since the Fed cut, it moved to lower a short-term rate that determines the money supply. The PBOC cut the 14-day reverse repo rate by 10 basis points to 1.85% on Monday, but did not cut the 7-day reverse repo rate, which was cut in July to 1.7%. Pan indicated that he would like the 7-day rate to become the main policy rate.

China’s economic growth has slowed, dragged down by the housing crisis and low consumer confidence. Economists called for more stimulus, especially on the fiscal front.

“Policy easing, including monetary, fiscal and housing policies, has been slow and gradual over the past year. This style of relaxation has, in turn, allowed various negative feedback loops to develop in the economy,” said Goldman Sachs chief economist Hui Shan. and a team said in a Sept. 22 note.

Their analysis indicated that the issuance of local government bonds is directed more towards addressing budget deficits than supporting additional growth.

Li Yunze, minister of the National Financial Regulatory Administration, and Wu Qing, chairman of the China Securities Regulatory Commission, will also speak at Tuesday’s press conference.

The National Financial Regulatory Administration was created last year as part of Beijing’s overhaul of its financial regulatory system. It replaced the banking and insurance regulator and expanded its role to oversee investor protection and regulate financial holding companies. Both were previously under the control of the securities regulator and the central bank respectively.

Wu was appointed chairman of the Securities Regulatory Commission in early February after a stock market crash. He was previously head of the Shanghai Stock Exchange.