MNI: China Policymakers To Link CGBs With MonPol Controls

     BEIJING (MNI) - China's Ministry of Finance (MOF) will enhance the role of

China Government Bonds as a main tool for central bank open market operations,

expanding their use in the transmission of monetary policy, Guo Fangming, deputy

director of the Treasury Department under the MOF told a economic forum earlier

Wednesday.

     On the basis of meeting the government's financing needs, policymakers will

continue to let CGBs play an important role in macro interest rate regulation,

financial market pricing, increasing monetary assets reserves and interest rate

risk management, Guo added.

     The move could improve coordination between CGB issuance and money supply,

a bond analyst told MNI, noting the People's Bank of China could inject

liquidity via direct purchases of CGBs from the MOF, rather than the current

operations that see the PBOC lending to financial institution using outstanding

CGBs as collateral. 

     "It would help transmission of CGB yields to policy rates," the analyst

said.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MMQPB$,M$A$$$,M$Q$$$]