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China's central bank still has plenty of tools that it can use to counter the detrimental effects of a trade war, its governor, Yi Gang, said on Sunday.
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China and the U.S. have imposed tit-for-tat tariffs on each other's products, which have made investors nervous and is seen as a major risk in derailing the global economy.
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"We still have plenty of monetary instruments in terms of interest rate policy, in terms of required reserve ratio. We have plenty of room for adjustment, in case we need it," Yi said.
China central bank still has plenty of tools that it can use to counter the detrimental effects of a trade war, its governor, Yi Gang, said on Sunday.
The Asian economic giant is in the center of a tariff fight with the United States The world's two largest economies have imposed tit-for-tat tariffs on each other's products, which have made investors nervous and is seen as a major risk in derailing the global economy.
"I think the downside risks from trade tensions are significant," Yi said at the International Banking Seminar, which was organized on the sidelines of the annual meetings of the International Monetary Fund and the World Bank in Bali, Indonesia
"We still have plenty of monetary instruments in terms of interest rate policy, in terms of required reserve ratio. We have plenty of room for adjustment, in case we need it," he said, adding that China still wants a "constructive solution" to the ongoing trade frictions.
Yi's comments came just days after the IMF downgraded global growth forecasts for this year and next year to 3.7 percent, citing ongoing trade tensions that could hurt confidence. China's economy is expected to grow 6.6 percent this year — maintaining an earlier forecast — but slashed the country's 2019 growth estimate by 0.2 percentage points to 6.2 percent.
The IMF also said that at its worst, the tariff fight could knock 1.6 percentage points off China's economic growth over two years, although it added that it expects much of that impact to be offset by the Chinese government's policies to stimulate the economy.
Yi said he largely agrees with the IMF's assessment on how an escalating trade war could impact the global economy. But he said China is on track to meet its growth target of 6.5 percent this year and "maybe a little bit more."
'No ease, no tight'
The People's Bank of China has on four occasions this year cut the amount of reserves that banks must hold, unlocking more cash into the economy so that businesses and households could borrow more money to spend.