China to boost targeted policy support for economy -state media citing cabinet

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FILE PHOTO: Customers dine at a restaurant in a shopping area in Beijing

BEIJING (Reuters) -China will step up fiscal and monetary policy support for the economy in a targeted way, state media quoted the cabinet on Friday as saying, raising expectations that more modest easing steps could be unveiled.

China’s key activity indicators showed the economy unexpectedly slowed in July, raising the heat on policymakers to ramp up measures to cope with headwinds including a resurgence of local COVID-19 cases and a slowing global economy.

China will consolidate its economic recovery and keep economic operations within a reasonable range, state media quoted the cabinet as saying after a regular meeting chaired by Premier Li Keqiang.

“At present, the economy continues to recover its development trend, but there are still small fluctuations,” the cabinet was quoted as saying.

“It is necessary to strengthen targeted financial and monetary policies to support the real economy, further consolidate the foundation of economic recovery, maintain the economic operation within a reasonable range,” it said.

Policy insiders and analysts told Reuters that China’s central bank (PBOC) is set to take more easing steps, though it faces limited room to manoeuvre due to worries over rising inflation and capital flight.

China is widely expected to lower its benchmark lending rates on Monday, a Reuters survey showed.

China will improve its market-based interest rate regime and support a rebound in effective credit demand, the cabinet said, adding that authorities will lower financing costs for enterprises and credit costs for consumers.

It also said China would extend an exemption of purchase taxes on “new energy” vehicles to the end of 2023 as part of the measures to boost domestic consumption.

(Reporting by Kevin Yao and Beijing newsrooom; editing by Mark Heinrich)