The country’s Ministry of Finance and central bank appear to be at odds over whether to use treasury bonds to boost liquidity into the flagging economy, Caixin reports.
This week two senior officials at the finance ministry recently called for use of treasury bonds as a quasi-currency, claiming that bonds have been used as the main collateral for the central bank’s monetary policy tools such as the medium-term loan facility (MLF).
The People’s Bank of China, meanwhile, has downplayed the idea. One source told Caixin that treasury bonds, despite being high-quality liquid assets, cannot be considered a quasi-currency as they are not a payment tool.
Liquidity levels are already sufficient, the source added, saying that a large-scale injection through quantitative easing is not necessary to provide financial support for the real economy.