Chinese Central Bank to Supply Liquidity to Prevent Asset Bubbles

China’s central bank said on Tuesday that it will maintain ample liquidity in the country’s financial system while taking steps to prevent asset bubbles in an increasingly leveraged economy.

In its third-quarter monetary policy implementation report, the People’s Bank of China said it will maintain a prudent monetary policy, fine-tuning in a preemptive and timely way and using multiple monetary policy tools flexibly to keep money markets stable.

“While creating neutral and appropriate monetary and financial environments for structural reforms and keeping liquidity reasonably ample, we should pay attention to curbing asset bubbles and preventing economic and financial risk.

“The balance between stabilizing growth and preventing bubbles has become more challenging,” the central bank said.

China has reported steady 6.7 percent economic growth for the last three quarters, and looks set to hit Beijing’s full-year target of 6.5 to 7 percent, fueled by strong infrastructure spending, record bank lending and a red-hot property market.

Beijing has depended on a surging real estate market and government stimulus to drive growth this year, even as it has stepped carefully to avoid repeating the huge stimulus package implemented during the global financial crisis, which saddled the economy with a pile of debt.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza