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China central bank should shun risky bond buying as economy improves: adviser

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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

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BEIJING: 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.

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.

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"Although the epidemic has caused a short-term impact on China's economy and fiscal revenue and expenditure, the economic recovery momentum has been quite obvious since the second quarter, and fiscal revenue and expenditure will gradually improve," the official Financial News quoted Ma as saying.

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.

The amounts of special treasury bonds and local government special bonds issued this year could not be too big, and they could be handled by the existing poliRead More – Source