Moderately loose talk

I’ve often thought that CCTV’s 7:00 p.m. "Xinwen Lianbo" (Joint News Broadcast) would provide the perfect platform for a drinking game. Every time the anchor says "Chairman Hu Jintao expressed…," take a drink. "Harmonious society" or "scientific outlook on development," another drink – and so on.

But the latest pronouncements from Beijing have me wondering if another game might get people more drunk more quickly: Take a shot whenever a government body or official reiterates that China will continue to pursue a "relatively" or "moderately" loose monetary policy.

Premier Wen Jiabao became the latest example over the weekend, with his announcement – if that is the word – that current economic policies would be maintained. China is "still facing many difficulties and uncertainties, including global economy outlook is still not clear, and external demands decline pressure is still relatively high," he said.

It’s a good thing he was there to remind us, or we might have forgotten that just last week, the People’s Bank of China (PBoC) said almost exactly the same thing in its quarterly monetary-policy report: "China’s economy is now in a critical period of stabilization and recovery, and maintaining stable and rapid economic growth is still the most important task we face." The central bank said it would "unswervingly implement the appropriately loose monetary policy."

A week before the report, on July 29, we find the PBoC pledging stable policies while warning that inflation could rebound. A week before that, yet another government statement that Beijing would maintain a moderately loose monetary policy.

This goes on back to April 23, when PBoC Deputy Governor Yi Gang first announced on the central bank’s website that the PBoC would "firmly stick" to a moderately loose monetary policy this year.

And yet investors don’t seem to be listening: The Shanghai Composite Index fell 4.4% last week on rumors that Beijing might pull back on stimulus programs and gradually tighten the lending environment (it is thought Wen’s weekend statement was in part a response to the market dip).

How long will Beijing continue to insist that nothing will change? How long will investors continue to believe it? I won’t even attempt to answer those questions. The whole situation does reflect pretty poorly on the development of China’s stock markets, however. After all this time, they remain little more than arenas for betting on government policy – and the more Beijing spouts the "moderately loose" line, the less likely people seem to want to trust it.

The whole thing is enough to drive anyone to drink.