China Central Bank Vows to Stabilize Market Expectations

Reuters

China's central bank promised to "stabilize financial market expectations" on Tuesday, saying it will head off risks in the latest show of official resolve to keep the economy on an even keel.

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Without referring to the shakeout in China's stock market which has slumped about a quarter since early June, the People's Bank of China (PBOC) said it would improve its warning system for risk.

Authorities would "pay attention to stabilizing financial market expectations," the central bank said in an online statement after Governor Zhou Xiaochuan met the heads of the bank's provincial offices.

It was not immediately clear whose expectations it wants to stabilize or how it would do it, but the comment follows the slump in the market and drastic measures to stop the sell-off.

The central bank would use various policy tools flexibly to sustain appropriate growth in liquidity and credit and keep policy "prudent," the statement said.

The PBOC would also aim to lower borrowing costs for firms and support key areas and vulnerable sectors, while keeping the yuan "basically stable" as it tries to refine the exchange rate system.

Chinese shares were seized by a vicious sell-off in June and July after speculation that the central bank had ended its monetary policy easing spurred investors to dump their stocks.

To halt the stampede out of the market, authorities took measures that included barring some investors from selling their shares, and mobilizing the country's top 21 brokerages to buy stocks.

The moves drew criticism that China was endangering its plans to reform the world's second-largest economy, though the official newspaper of the Communist Party has defended the measures as necessary. (Reporting by Winni Zhou and Kevin Yao; Editing by Nick Macfie)