Old Xi Jinping speech sparks China monetary easing speculation
© Reuters. FILE PHOTO: Chinese President Xi Jinping applauds at the closing session of the National People's Congress at the Great Hall of the People in Beijing, China March 11, 2024. REUTERS/Tingshu Wang/File PhotoBEIJING - A sentence from a months-old speech by Chinese President Xi Jinping has sparked speculation the central bank might start aggressively buying government bonds to support the economy, a stimulus measure China has long shunned.
"The People's Bank of China must slowly increase the trading of treasury bonds in its open market operations," Xi told a major financial meeting in October in a speech that was not published at the time but was included in a book this month. The speculation also reflects investor sensitivity to comments made by Xi, China's president for 11 years and its most powerful ruler since Mao Zedong.Xi's speech was"not buying government bonds in the primary market, therefore not an indication of QE", said Morgan Stanley's chief China economist, Robin Xing.
Xi was"calling for replenishing the central bank's monetary policy toolkit", including expanding its options in open-market trading of government bonds to manage liquidity, said Tao Wang, head of Asia economics and chief China economist at UBS Investment Bank. Last month, the PBOC cut its five-year loan prime rate by 25 basis points to 3.95%, the most since the reference rate was introduced in 2019.
China is targeting 3.9 trillion yuan in local government special bond issuance this year to support the economy, up from 3.8 trillion yuan last year, and 1 trillion yuan in special ultra-long term treasury bonds to help key sectors.
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