MNI BRIEF: PBOC Should Watch Excess Liquidity On Weak Demand

The People’s Bank of China should save policy ammunition to prevent a surge in debt as market liquidity has been excessive and it should focus instead on boosting credit in the property sector in the second half, PBOC advisors and former officials said in a summit held by China Wealth Management 50 Forum on Saturday.

Policy should not overdraft future options in the process of pushing the economy back to a normal track, and should accelerate current stimulus measures, said Wang Yiming, member of the PBOC monetary policy committee. Wang noted policy tightness of major economies will pressure China via capital flows and the yuan volatility, which will contain the PBOC’s easing room.

Guan Tao, global chief economist of BOC International and a former PBOC official, said the 11.4% yoy growth of M2 in June indicated policy has been looser than the hardest time of pandemic outbreak in 2020, even as credit demand remains weak. Zhang Xiaojing, director of the National Institution for Finance and Development, said China's macro leverage/GDP ratio jumped to 273% in H1 from 263% in 2021, for the whole year, he predicted the ratio would be around 273% to 275% as the economy recovers in H2.