The People's Bank of China should avoid buying special treasury bonds as such a move could fuel inflation risks and asset bubbles and lead to depreciation of the yuan currency, central bank policy adviser Ma Jun said in remarks published on Sunday.
FILE PHOTO: The headquarters of the People's Bank of China, the central bank, is pictured in Beijing, China, as the country is hit by an outbreak of the new coronavirus, February 3, 2020. REUTERS/Jason Lee
China’s leaders have pledged to take more steps to support the virus-ravaged economy, prompting a heated debate among economists and advisers over whether the central bank should monetize its fiscal deficit through quantitative easing. Top leaders have pledged to raise the annual budget deficit ratio, issue more local government special bonds and what would be the first special treasury bonds since 2007 in order to help spur economic growth, but few details have been made public.
China’s central bank could further cut banks’ reserve requirement ratios or provide liquidity via some mechanism to support their purchases of new treasury bonds, Ma said.
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