China central bank should shun risky bond buying as economy improves
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China central bank should shun risky bond buying as economy improves
The People’s Bank of China should avoid buying special treasury bonds as such a move could fuel inflation risks and asset bubbles and lead to depreciation of the yuan currency, central bank policy adviser Ma Jun said in remarks published on Sunday.
China’s leaders have pledged to take more steps to support the virus-ravaged economy, prompting a heated debate among economists and advisers over whether the central bank should monetize its fiscal deficit through quantitative easing.
"Although the epidemic has caused a short-term impact on China’s economy and fiscal revenue and expenditure, the economic recovery momentum has been quite obvious since the second quarter, and fiscal revenue and expenditure will gradually improve," Ma Jun said.
China’s central bank could further cut banks’ reserve requirement ratios or provide liquidity via some mechanism to support their purchases of new treasury bonds, Ma said.
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