China’s central bank keeps ‘cautious’ in bond trade despite Xi Jinping’s mandate
- Though President Xi Jinping has instructed China’s central bank to buy and sell government bonds, the institution is likely to be modest in doing so
- Analysts say bank wants to avoid large-scale intrusion into bond markets, prevent perceptions of quantitative easing or heavy-handedness
Despite instructions from President Xi Jinping to resume the trading of central government bonds, China’s central bank is expected to take a cautious approach to mitigate unexpected consequences for inflation and the exchange rate, analysts said.
The instruction, only made public earlier this week with the release of a new book, fuelled feverish speculation over an aggressive easing of monetary policy.
The flurry of conjecture comes at a time when many observers are questioning whether China can achieve its 5 per cent target for economic growth this year while boosting the confidence of a sluggish private sector, resolving a crisis in the property market and handling the hefty debt loads of local governments.
The macro policy tone in 2024 is supportive but modest in scale
Analysts said the president’s demand does not necessarily imply China will enter a round of quantitative easing (QE) in a similar fashion to Western central banks.
“It doesn’t mean that China is going to launch QE or roll out a major stimulus. The macro policy tone in 2024 is supportive but modest in scale,” said Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank, in a note published on Thursday.