MNI POLICY: China To Keep Stimulus Measures, PBOC Not Using QE

     BEIJING (MNI) - The People's Bank of China (PBOC) isn't pursuing a version

of quantitative easing, a government researcher told MNI Tuesday.

     "There is no need for QE; we still have many options," such as further

cutting reserve ratios or even rates, Sun Xuegong, director of the Institute of

Economic Research under the National Development and Reform Commission, said on

the sidelines of a Beijing press briefing.

     Last week, the central bank said it would begin allowing commercial lenders

to issue perpetual bonds backed by central bank bills, seen by some analysts as

a form of QE. 

     But Sun explained it was a move to help boost capital at China's banks. As

regulators curbed off-balance-sheet lending last year, leading to a slowdown in

aggregate financing, the central bank must fill the gap by topping up banks'

capital, he said

     Additionally, China is pursuing measures, including boosting lending, to

ensure the economy grows in a "reasonable range," but won't use them as main

drivers or pursue quantitative easing, he said. 

     --CHINA GROWTH

     Overall, the economy can be expected to grow 6-6.5% this year, Sun added. 

     China's economy is facing long-term "pains" of adjustment as it tries to

upgrade from its traditional model, and short-term slowdown should not affect

the tasks, such as cleaning up the environment, containing debt and balancing

distribution of wealth, Sun said

     Sun acknowledged that additional expenditure to fund investment in

infrastructure may add to the overall debt, but he argued that China's target is

on the ratio of debt to GDP. 

     If nominal GDP slows too much as a result of efforts to contain debt, that

may also cause leverage ratios to gain, so containing debt "also needs a

reasonable rate," of GDP growth, Sun said.  

     Infrastructure investment will mostly be funded by local government debt,

Sun said, echoing an official line that China's government debt ratios are lower

than those in many western countries.  

     --PREVENT PROPERTY SPECULATON

     Sun said policymakers will also prevent further rounds of property

speculation, and stick to President Xi Jinping's directive that houses are not

to be an item of speculation, and the property markets should be treated

according to each cities . 

     Sun also downplayed the need for further monetary easing, such as cutting

prime interest rates. Short-term rates are already pretty low after rounds of

cuts to reserve requirement ratios, he said. The challenge is for the proper

transmission of the monetary policies' intent, he said. 

     The economy is stabilizing and will likely rebound, so both CPI and PPI

will likely be stable after weakness in December, Sun said. 

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

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