China May Tighten Policies Next Year to Counter Rising Surplus Payments: Yicai

China may be forced to tighten monetary policies next year amid increasing liquidity resulting from the expanding balance of payments surplus, estimated to be as much as USD550 billion in the third quarter, Yicai reported in an article jointly written by Zhang Yi, an economist from ZhongHaiShengRong Capital Management, and Zhang Jianyuan, an economist from China Securities Co. The increasing surplus may force the PBOC to add about CNY2.5 trillion in base money from Q4 to Q1 of next year, leading to excess liquidity, wrote the authors. The expected growth of government revenue will likely reduce next year's deficit to less than 3% of the GDP, and thus eliminate the issuance of special treasury bonds for the pandemic, wrote the authors. Limitations on land-related projects are likely to suppress the issuance of special bonds for next year since there are still CNY1.6 trillion of special bonds not yet factored into GDP, the authors wrote.