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China explores bond buying in first hint of QE
By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, June 1, 2014
China's central bank is exploring direct purchases of bonds and other assets to support key sectors of the economy in case the slowdown deepens, according to a leading Chinese business publication.
A front-page article in the China Securities Journal -- regulated by the central bank -- reported growing concerns about the weakness of the money supply and bad debts accumulating in the financial system.
The authorities may have to widen the range of possible options for "targeted monetary loosening." These include surgical stimulus for the West and Central regions, as well as "direct asset purchases by the central bank," mostly government bonds and financial and railroad debt as well as state-backed housing bonds.
It is the first hint of quantitative easing in China, and has left analysts scratching their heads. The central bank has many other tools available that would normally be used first to combat incipient deflation. The Reserve Requirement Ratio is still 20 percent. This could be slashed to low single-digits if need be, generating up to $2 trillion of stimulus through higher lending. ...
... For the full commentary:
http://www.telegraph.co.uk/finance/china-business/10868381/China-explore...
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