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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.
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.
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