China thinks market views on monetary policy move too ‘simplified’

Chinese flag seen in Beijing
The Chinese national flag is seen in Beijing, China April 29, 2020. REUTERS / Thomas Peter

December 6, 2021

BEIJING (Reuters) – A Chinese newspaper run by the State Council, or cabinet, warned markets against “simplified” interpretations of monetary policy moves as easing expectations are pent-up, suggesting that China is not about to unleash a massive credit wave in a panic.

Expectations that the central bank will ease policy surged after Premier Li Keqiang said on Friday that the amount of cash banks must hold in reserves would decrease “in a timely manner”, amid The economic situation is increasingly difficult due to the increasingly difficult real estate sector.

“This is a rather simplistic interpretation of macroeconomic policy, which can easily lead to misunderstandings,” the Economic Daily said in a commentary on Monday.

According to the commentary, China’s monetary policy will focus more on continuity and stability while taking into account the government’s short- and long-term goals.

China Evergrande Group warned on Friday that there was no guarantee it would have enough money to repay its debt.

Yields on China’s 10-year Treasury note – the most actively traded bond on the interbank market – fell nearly 5 basis points in early Monday trade as expectations eased. .

Nomura analysts said in a note on Monday that they expect the economy and the real estate sector in particular to deteriorate further and that Beijing may have to significantly increase easing measures. policy in the spring of 2022 to prevent a hard landing.

However, the financial daily ruled out a stimulus to boost the economy, saying China would implement more targeted policies to deal with any downward pressure. down.

It added that coordination between monetary policy, fiscal policy and industrial policy would be enhanced.

After widely cutting the amount of cash banks must hold in reserve in July, China’s central bank has since defied market expectations for further policy easing.

Government advisers will recommend authorities set the economic growth target for 2022 below the “above 6%” target set for 2021, several advisers previously told Reuters.

(Reporting by Stella Qiu and Ryan Woo; Editing by Jacqueline Wong) China thinks market views on monetary policy move too ‘simplified’

Bobby Allyn

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