(Yicai Global) Dec. 2 -- China needs a prudent and moderately loose monetary policy to achieve economic growth of at least 5 percent next year and prevent systemic financial risks, according to the chief economist at Zhixin Investment Research Institute.

China’s monetary policy may face a more complicated situation in 2022, with the need to stabilize growth, safeguard employment, stave off risks, control prices, and promote balance, Lian Ping told Yicai Global.

Because consumer prices could rise next year, a substantially loose monetary policy would not be appropriate, even though downstream and consumer product prices are unlikely to keep rising sharply amid oversupply, he said.

To achieve its 2022 monetary policy goal, the People’s Bank of China will maintain reasonable and ample market liquidity, promote the steady and rapid growth of credit and social financing, and further improve the credit structure, Lian said.

The central bank will also promote generally stable quoted interest rates with slight drops in the loan market, use refinancing and rediscount tools to integrate the total volume, structure, and price, and slightly reduce the requirements of the reserve ratio to raise bank credit supply, he said.

The resurgence of Covid-19 may continue to affect consumption and production, according to Lian who noted that higher upstream product prices will weigh on mid- and downstream investments, and adjustments in the real estate market will dampen investment and consumption. Hidden financial risks will still exist in some fields, Lian said.

Internationally, there are still some variables that can influence the pace and intensity of the US Federal Reserve’s monetary policy tightening, as well as the possibility of a 0.25 percent interest rate increase, Lian said.

The current account surplus and the capital account surplus between China and the United States, the effective management of cross-border capital flows, and China’s economic resilience will effectively stem the spillover effect of Fed policy, he said, adding that China’s monetary policy will focus on itself.

Editor: Futura Costaglione