The People’s Bank of China is turning to a hidden hand as it seeks to stimulate the world’s second-largest economy without worsening debt risks.
Contrary to the US Federal Reserve’s forward guidance, the Bank of England’s increased transparency and a G20 vow to clearly communicate policies, China has added liquidity by stealth at least four times in the past four months.
One proxy it has been using is China Development Bank Corp (中國開發銀行), the nation’s biggest policy lender.
Balancing the need to buoy an economy set for its slowest full-year expansion since 1990 and efforts to contain a debt pile that has almost doubled in six years, China’s leaders have sought a targeted monetary path that is deviating from advanced economy peers.
The problem is, by keeping in the shadows, speculators have jumped in, pushing the stock market up more than 20 percent since the central bank’s benchmark interest rate cut on Nov. 21 in anticipation of more monetary easing.
“It lacks both transparency and effectiveness,” said Ding Shuang (丁爽), senior China economist at Citigroup Inc in Hong Kong, who used to work at the Chinese central bank. “On this year’s policies, I can say I have no clue of their reasoning.”
On transparency, People’s Bank of China Governor Zhou Xiaochuan’s (周小川) past comments suggest he is less wedded to the global push for clearer policy signaling and prefers to let actions speak for themselves.
In a closed-door speech made at Tsinghua University in May, Zhou said forward guidance adopted by the Fed when it was running out of policy options may not serve China, which still has room to send clear messages via policy moves.
As for effectiveness, one criticism of unannounced liquidity injections is that they lack “signaling impact” compared with benchmark rate cuts or lowering the central bank’s reserve requirement ratios, analysts at Morgan Stanley led by chief China economist Helen Qiao (喬虹) wrote in a research note this month.
The central bank will lower the benchmark one-year lending rate by 25 basis points to 5.35 percent in the first quarter and by another 15 basis points by the end of June, according to economists surveyed by Bloomberg from Thursday last week to Tuesday.
The central bank may cut banks’ required reserve ratio by a total of 1 percentage point in the first half, the survey found.
The central bank rolled over at least part of a 500 billion yuan (US$80 billion) three-month lending facility to the largest Chinese lenders last week, days after it injected 400 billion yuan via China Development Bank, according to people familiar with the measures.
Neither move, nor an offer of short-term liquidity to banks, has been officially announced.
These steps followed a 1 trillion yuan loan to China Development Bank to bolster social housing reported first in the middle of the year, but only confirmed in a government statement this month.
Injections of 769.5 billion yuan in September and October were announced almost two months later in a quarterly report.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day