The Eurozone's Flagging Economy Is Working Hard.

The ECB officials are working hard to raise the euro zone's flagging economy and plan for a monetary easing plan of 1 trillion and 100 billion euros. In the process, the central bank's selling of German bonds seems to be a great help, and the ECB's quantitative easing measures avoid the embarrassment of "no debt to buy".

China's central bank reserve authority, the SAFE, has been selling German government bonds since the European Central Bank began buying German government bonds in March.

With China's slowing economic growth and RMB depreciation leading to capital outflow, China's foreign exchange reserves declined from 4 trillion in June 2014 to 3 trillion and 500 billion US dollars now. In August 11th this year, the Central Bank of China unexpectedly announced the depreciation of the renminbi.

Reducing the holding of foreign government bonds can also help stabilize the currency exchange rate and avoid further devaluation of the currency. The sale of a large number of foreign currency denominated assets this year is being offset. RMB Any pressure on the issue.

Tao Wang, a Chinese economist at UBS, estimates that China holds 1 trillion and 400 billion of US Treasury bills and 800 billion of other government bonds, mainly in Europe, Britain and Japan. Wang Tao, Most of the rest is institutional and corporate debt, plus some American stocks.

The ECB wants to promote investors to buy bonds through bank bond trading counters, but such actions are not always safe.

But selling German bonds makes it easier for Europe to adjust its currency. As part of the quantitative easing plan, traders buy 60 billion euros of bonds every month, mainly government bonds, but this is a very difficult plan to deal with.

Around the 1 trillion and 100 billion euro plan, the market has long worried about whether the German Central Bank (Bundesbank) can find enough German bonds to buy at fair prices.

As part of the quantitative easing policy, the Bundesbank must buy about 10 billion euro a month. Considering that the number of bonds issued by Germany is relatively small, this may be a potentially difficult plan, although the ECB officials are trying to offset the concerns of investors.

People familiar with the matter say that the Bundesbank may sell bonds to worry the world.

stay foreign exchange reserve Under the pressure of portfolio returns, China safe has been willing to sell at a high price on low yield German bonds, thereby gaining revenue.

Eswar Prasad, an economist at Cornell University and Prasad, a former director of the International Monetary Fund, pointed out that China's sale of German bonds would certainly promote the quantitative easing action of the European Central Bank, so this is an example of the interests of the Central Bank of China and the European Central Bank.

The slowdown in the emerging market threatens the economic recovery in the euro area and forces the euro zone to adopt a more aggressive monetary easing policy. At that time, the European Union's European government debt, which sells hundreds of millions of euros, will also help the ECB.

Estimate European Central Bank In December, efforts will be made to reform and further expand quantitative easing policy in order to cope with the economic slowdown. The new plan includes extending its debt purchase plan to the original purchase deadline of September 2016 or raising the size of the current 60 billion euro monthly bond purchase.

If the ECB increases its quantitative easing policy, the price of German bonds may rise again, and any gains from China's safe may be wiped out by the weakening of the euro.

The euro has fallen by 13% against the US dollar in the past 12 months. If the ECB loosened its monetary policy in December 3rd, the Fed could raise interest rates at the end of this year, as expected by President Yellen, and the euro could fall further against the US dollar.

Although some euro founders hope that the euro will eventually challenge the US dollar as the hegemony of the world's major reserve currencies, this is not the first consideration of the European Central Bank.

The European central bank governor Delaki (Mario Draghi) announced in August 2014 that the European Central Bank would reduce the euro. He hinted that this is the monetary easing policy of the European Central Bank, which is longer than that of the US Federal Reserve.

The ECB renewing monthly purchases of bonds, but will not comment on single transactions. It is not yet clear that bonds are scarce enough to buy, and the Bundesbank declined to comment.