29 Apr 2015
PBoC’s liquidity injection not equivalent to a Chinese version of QE - Nomura
FXStreet (Bali) - The Nomura Economics Team notes that the PBoC’s liquidity injection is not equivalent to a Chinese version of QE.
Key Quotes
"QE, in essence, is a monetary policy regime change with an accelerated expansion of a central bank’s balance sheet while policy rates are close to zero. Given China’s monetary background, QE would mean a more aggressive expansion of the PBoC’s balance sheet, but this is not what is happening."
"As explained above, the recent liquidity injections have mainly been to offset shrinking FX purchases in the maintenance of the normal expansion of the central bank’s balance sheet."
"The bottom line is that there is no extra liquidity growth in terms of the monetary base or broad money (M2) from the PBoC’s liquidity injections."
Key Quotes
"QE, in essence, is a monetary policy regime change with an accelerated expansion of a central bank’s balance sheet while policy rates are close to zero. Given China’s monetary background, QE would mean a more aggressive expansion of the PBoC’s balance sheet, but this is not what is happening."
"As explained above, the recent liquidity injections have mainly been to offset shrinking FX purchases in the maintenance of the normal expansion of the central bank’s balance sheet."
"The bottom line is that there is no extra liquidity growth in terms of the monetary base or broad money (M2) from the PBoC’s liquidity injections."