China needs to ensure policies boost economy, lower real rates: Premier Li

Chinese Premier Li Keqiang speaks at the "1+6" Roundtable meeting at the Diaoyutai state guesthouse in Beijing, China November 21, 2019. REUTERS/Florence Lo

BEIJING (Reuters) - China needs to make better use of its various policy tools to boost the economy, Premier Li Keqiang said on Thursday, as growth teetered near three-decade lows and a partial trade deal with the United States remained elusive.

Monetary policy needs to place more stress on developing the real economy, especially small and medium-sized enterprises, Li told reporters after a roundtable with World Bank and IMF chiefs. He said China will use “efforts through all channels” to lower real interest rates.

“[China’s] prime rate is a little bit over 4% for one year so we still have room to deal with monetary policy expansion,” said former central bank governor Zhou Xiaochuan on Thursday at a separate event in Beijing.

The loan prime rate, China’s lending benchmark rate, was again lowered on Wednesday to reduce company funding costs and shore up an economy hurt by slowing demand and U.S. trade tariffs.

China’s economy has maintained a stable performance this year and the government is confident that it will achieve the main social and economic targets for 2019, said Li.

Beijing will continue with a proactive fiscal policy and a prudent monetary policy, he said.

Growth in the world’s second largest economy slowed more than expected to 6.0% year-on-year in the third quarter, the weakest pace in nearly 30 years.

The government has pledged not to open the floodgates to massive stimulus as it did in the past, and has largely leaned on a prescription of higher infrastructure spending, tax cuts and frequent liquidity injections to cushion the current slowdown.

Reporting by Gabriel Crossley; Editing by Kim Coghill & Shri Navaratnam