China's central bank to adjust liquidity as necessary

China’s central bank Governor Zhou Xiaochuan said the country’s economic growth is facing relatively big downward pressures and that the country will increase financial incentives to support small firms.

This comes after the central bank reaffirmed over the weekend its commitment to keep credit growth steady. In a statement on its website, the PBOC said, both price and quantitative policy tools will be used to guide an appropriate growth in liquidity.

These statements came just on the heels of last Friday’s total social financing reading a broader measure of liquidity in the Chinese markets that number declining in June.

It also comes after liquidity concerns we saw last month which saw short term borrowing costs spike to nearly 30-percent on June 20th. Those rates have since eased back to their normal 3 to 4 percent range.

A prudent monetary policy and controlling wasteful credit expansion are all part of the government’s efforts to push ahead with structural reforms in the country.

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