I’ve been warning for some time that Chinese stimulus is likely to be temporary and fade before long. The head of the People’s Bank of China agrees. From Bloomberg:
The People’s Bank of China warned that the country’s credit and money supply have increased rapidly and indicated that it will refrain from broader monetary easing to support growth.
“The total debt level has been rising relatively quickly,” the PBOC said in its second-quarter monetary policy report on Aug. 1. “Our existing money supply and credit are already relatively large and their growth is also high.”
…“Restructuring and reform of the economy remains an arduous task,” the central bank said in its 54-page report. “It’s not appropriate to expand overall liquidity sharply to solve structural problems.”
The PBOC reiterated its “prudent” monetary-policy stance and pledged to “keep overall liquidity stable while improving its structure.” It said it will exploring resolving local-government debt problems in “market-oriented” ways.
The central bank reiterated it will use tools including open market operations, reserve requirement ratios, relending, standing lending facilities, and short-term liquidity operations to adjust liquidity, according to the report.
The reserve ratio cuts that every second Western economist has been begging for are not coming, it seems.
