In an interview, China’s PBoC Governor Yi Gang said recent stock market volatility is emotion-driven and urged investors to stay calm. He referred to the -3.78% decline in the Shanghai Composite today. Yi added that resilience of the Chinese economy has increased. Additionally, as domestic demand picked up, China’s reliance on international trade has dropped from 64% in 2006 to 33% last year. That’s even lower than the world’s average of 42. Current account surplus’ contribution to GDP also dropped from 10% in 2007 to 1.3% last year. He noted that the “economic endogenous potential is huge and there are sufficient conditions and space to deal with various trade frictions.”
Earlier today, the PBoC injected CNY 200B liquidity into the markets through its medium-term lending facility (MLF). PBoC said the cash injection was to “make up for mid- to long-term liquidity gap in the banking system”. But it’s seen by analyst as part of the package of measures safeguard the economy, in preparation for further escalation in trade conflict with the US. In addition to that, it’s believed China would also quicken the boost in domestic demand through fiscal polices like tax cuts and spending.
