China sending ‘clear message’ with quantitative easing warning as US prepares to raise debt ceiling

US Treasury Secretary Janet Yellen and Federal Reserve chair Jerome Powell are urging senators to approve a higher federal debt limit ahead of next month’s deadline

But People’s Bank of China (PBOC) governor Yi Gang remains clear that China must maintain the prudent stance it adopted last summer

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Governor of People's Bank of China (PBOC) Yi Gang attends a news conference on China's economic development ahead of the 70th anniversary of its founding, in Beijing, China September 24, 2019. Photo: Reuters

Published: 4:59pm, 29 Sep 2021Updated: 10:48pm, 29 Sep 2021

China has sent a “clear message” over its disapproval of expansionary monetary policies, especially the asset purchases widely favoured in major Western countries to combat the impact of the coronavirus, following comments by the head of its central bank.

“China currently doesn’t need to conduct asset purchases,” Yi Gang, governor of the People’s Bank of China (PBOC), wrote in a 5,800-word article in the September issue of Financial Research on Tuesday.

“Conditions allow this because the country’s potential economic growth potential is expected to stay between 5 and 6 per cent, and the yield curve can be maintained at a normal upward slope.”

In the United States, Treasury Secretary Janet Yellen and Federal Reserve chair Jerome Powell have urged senators to approve a higher federal debt limit ahead of next month’s deadline, warning a “disastrous” default could induce a financial crisis.

China won’t have quantitative easing, despite the recent China Evergrande debt crisis that has fuelled such speculation overseas and the fact fourth quarter growth may slow amid other factors, including the power restrictions

Raymond Yeung

Domestically in China, the call for monetary easing has resurfaced due to the emergence of the Delta variant of the coronavirus, which is still haunting the southern coastal city of Xiamen and the northeastern city of Harbin, as well as rising commodity prices and the nationwide power cuts that are hitting industrial production.

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