Monetary policy adjustments is a trial and error process: China central bank advisor

A Chinese national flag flutters outside the headquarters of the People's Bank of China in Beijing

HONG KONG (Reuters) – China’s central bank will continue to implement reasonable adjustments to monetary policy while keeping it neutral with a tightening bias, People’s Bank of China (PBOC) advisor Sheng Songcheng said.

The central bank will not excessively adjust monetary policy, Sheng said in an interview with Chinese financial magazine Yicai published late on Monday.

While the central bank continues to push for deleveraging to fend off financial risks, “it is a trial and error process,” he said in the interview. 

“If it went tight, it would be loosened a bit. The central bank will not overdo it, and any adjustment doesn’t represent a shift in policy direction,” Sheng said.

He said outstanding total social financing has become a better gauge for monetary adjustments than broad M2 money supply (M2) adding that, due to the fast expansion of shadow banking credit, total loan growth may not be able to reflect social funding entirely.

(Reporting by Meg Shen in Hong Kong and Ryan Woo in Beijing; Editing by Catherine Evans)