PBOC denies country has fallen into liquidity trap

China’s central bank, the PBOC, said in an official statement published on Tuesday, that the central bank denies that the country has fallen into a ‘liquidity trap’, weeks after a senior central bank official publicly flagged such risks.

The PBOC noted that corporate cash hoarding is “not necessarily related to” or “criteria” of a “liquidity trap”. “Due to a variety of reasons, turbulence in monthly monetary figures is normal. We suggest not over-interpreting the data of a single month,” the central bank said.

“At present, banks have ample liquidity. Interest rates are at a low level. We will keep our stable monetary policy flexible and adjustable accordingly to provide an environment for stable economic growth and supply-side restructuring,” the bank added.

In a public speech a month earlier, Sheng Songcheng, the statistics chief of the PBOC, said that the surge in corporate cash hoarding meant that Chinese businesses, “to some extent”, were falling into a liquidity trap.