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Wednesday, October 14, 2015, 23:09

Expansion of relending program 'not QE'

By Xinhua

BEIJING - The expansion of a credit-asset pledged relending program should not be misinterpreted as a Chinese version of quantitative easing (QE), a senior economist of the central bank told Xinhua on Wednesday.

It will not have a significant impact on total liquidity and should not be misread as a kind of QE, said Ma Jun, chief economist at the central bank's research bureau.

Credit-asset pledged relending allows banks to refinance high-quality credit assets rated by the central bank. Under the program, the central bank relends money to commercial banks which use high-quality credit assets as pledge.

The People's Bank of China (PBOC), China's central bank, announced last Saturday it would expand the pilot program from Shandong and Guangdong to nine municipalities and provinces, including Shanghai, Tianjin, Beijing and Chongqing.

The move is intended to cut borrowing costs and guide more funds into agriculture and small enterprises to boost the real economy, the PBOC said.

"The expansion of the program does not mean the central bank will inject liquidity on a large scale," said Ma, adding that the annual growth target of outstanding broad money supply (M2) will remain unchanged at 12 percent.

He said the expansion of the program provides prerequisite for local financial institutions to obtain more liquidity support, but it does not necessarily mean all the local financial institutions will automatically receive liquidity support.

The main purpose of the credit-asset pledged relending expansion is to fine-tune the liquidity management of the central bank, especially to facilitate short-term fund injections to small and medium banks, to avoid financial risks, said Zeng Gang of the Chinese Academy of Social Sciences.

He said the move can be seen as an attempt by the central bank to maintain financial stability and raise the banking system's capability to support the real economy.

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