China can expand monetary policy, ex-governor of PBOC says

China still has room for monetary policy expansion as the country's interest rates are not as low as they are in advanced economies, Zhou Xiaochuan, former central bank governor, said on Thursday.

Zhou said it requires cooperation with fiscal policy and structural reforms for monetary policy to be effective and successful in stimulating growth and preventing crisis from happening.

The former governor of the People's Bank of China warned about the situation of zero lower bound, which occurs when the short-term nominal interest rate is at or near zero, causing a liquidity trap and limiting the capacity of the central bank to stimulate growth.

"If you get into zero lower bound, it is very difficult for the central bank to play positive roles. Now we are in a period of very low interest rates. We need to try our best to avoid getting into zero lower bound before the crisis happens," Zhou said at a panel discussion at the New Economy Forum in Beijing.

Zhou also warned about the risks of growing trade frictions and trade wars, which he said could bring the world economic growth down.