The Central Bank Is Under Two Pressures. China'S QE Is Just Around The Corner.

We have already said on many occasions that China's monetary policy is in a dilemma at the end. It may end up with no choice but to join the global quantitative easing camp (perhaps through the purchase of local government debt).

In practice

On the basis of it, the renminbi is the second largest currency in the world.

The new bank has recently pointed out that when the renminbi is unable to withstand further adverse factors, this strength will hurt.

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Unfortunately, the risk of depreciation may exacerbate capital outflows at a time.

Foreign exchange deposits data show that concerns about the short-term outlook for the renminbi are intensifying.

We can briefly summarize the following: depreciation is too much, capital outflows will accelerate, depreciation is not enough, and business capitalists will dominate the economy.

As Bloomberg reported, there is evidence that with the rise in interbank interest rates, the PBC is under two pressure.

So far this year, 7 days.

The average is 4.41%, a lot higher than that of 4.16% a year ago.

At the same time, this has also hit the highest level since then in 2004.

ANZ bank and AXA Investment Management Company believe that the Central Bank of China will reduce the reserve requirement ratio this month, while Barclay Bank expects the Central Bank of China to take this measure in the coming weeks.

The two reduction in benchmark interest rates and reserve requirements for banks in four months failed to reduce the cost of loans. China is facing capital outflows in the world's second largest economy.

Chinese Premier Li Keqiang said on Sunday that China's economic growth target this year is 7%. If China's economic growth is deteriorating below this threshold, and the unemployment rate or wage level will decline, policy makers will take action.

Rajeev de Melo, head of Asia's fixed income Schroder Investment Management Ltd, manages about $10 billion of assets, he said in an interview in Singapore in March 12th. "I also expect the Central Bank of China to reduce the deposit reserve rate."

AXA Investment Company manages $660 billion in assets globally. Aidan Yao, a senior economist at the company, said: "export growth will not offset the adverse effects of domestic weakness."

If interbank interest rates can not be reduced, banks will not be willing to pass the latest interest rate cuts to borrowers.

We believe that the Central Bank of China is likely to cut reserve requirements again by the end of this month.

It all looks good.

But there are disadvantages to benefits.

Monetary easing may cause greater volatility in the foreign exchange market and speed up capital outflow.

In fact, some people will insist that the Chinese government may be willing to tolerate certain economic pain, if this pain can fight against the fear of devaluation.