Wednesday, August 3, 2016

Monetary Policy Tension in China

WSJ reports:
On Wednesday morning, a unit of the National Development and Reform Commission, the country’s highest economic planning agency, released a statement laying out the economy’s troubles and calling for a string of policy actions in a bid to revive corporate activity.

Nothing very unusual about that, except that in the middle of the statement, the NDRC’s policy research unit wrote 13 characters that said: “Lower benchmark interest rates and banks’ reserve requirement ratio at appropriate times.”

The only problem was: Control over interest rates isn’t in the NDRC’s bailiwick. Monetary policy is entirely the responsibility of the People’s Bank of China, and it hasn’t touched rates since October. It is highly unusual for any other agency, let alone an entity of the government body charged with running state infrastructure projects, to openly comment on what it thought China’s monetary policy would or should be.

Within hours, it had become clear that the NDRC’s research unit had overreached. By late afternoon, the 13 offending characters had vanished from the statement. But the original version still floated in parts of China’s internet...
The omission spoke to the tension between two camps charged with stewarding China’s economy. For months now, those allied with the central bank have warned that an ever-increasing reliance on looser liquidity is failing to juice the economy, arguing that monetary policy has reached its limits and abusing it would only cause consumer- and asset-price inflation.
Sounds like the NDRC is run by Paul Krugman-types. 打印,打印,打印!


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