Central bank committed to prudence

PBOC's moves not to be confused with initiating quantitative easing

China's central bank may regard treasury bond trading in the secondary market as one of the common means to provide liquidity — a practice that hasn't been active for about two decades and a meaningful means to optimize its monetary policy system, experts said.

But such a potential shift, they stressed, should not be mistaken as China initiating quantitative easing (QE) as some Western central banks have resorted to, as such a move serves different purposes and indicates a much more aggressive policy stance. The People's Bank of China, the country's central bank, instead, is expected to maintain moderate monetary accommodation this year.

Discussions of whether China will start QE to stimulate growth heated up after a compilation of excerpts from discourses by the country's top leadership on China's financial sector, published last month, included the words: "enriching the monetary policy toolbox and gradually increasing the buying and selling of treasury bonds in the central bank's open market operations". The PBOC has declined to comment on the speculation.