Inflation concerns over economic overheating
People’s Bank absorbed through open market
Shanghai stock market closes plunging 1.51%
The Shanghai stock market collapsed as Chinese financial authorities began to recover liquidity through open market manipulation. While economic growth of more than 8% is expected this year, observations are made that China, which is concerned about overheating the economy, is turning to austerity.
According to Chinese media on the 26th, the People’s Bank of China, the central bank of China, purchased only 2 billion yuan of 7-day reverse redemption conditional bonds (reverse RP) of 80 billion yuan, which had maturity on this day, and the remaining 78 billion yuan (about 13 trillion yuan). Won) I changed it. Accordingly, the market liquidity of RMB78 billion was absorbed into the central bank.
The People’s Bank had been buying reverse RP for about 50 days before, but it suddenly stopped. In particular, this redemption is more symbolic as it comes ahead of the Lunar New Year holiday in February, which requires a lot of money in the market.
According to Reuters, the Shanghai Stock Exchange’s overnight repo rate rose by 5.4% this afternoon. This is more than double the number of 2.975% the previous day. In fact, China is the first to officially reduce liquidity at the central bank level amid a new coronavirus infection (Corona 19) pandemic (a global pandemic) in progress.
Earlier, Chinese financial officials repeatedly raised concerns about inflation caused by economic growth. China was the only major country to record positive growth (2.3%) last year, and it is expected to grow more than 8% this year. According to the 21st Century Economic Report on the day, Lee Kang, head of the People’s Bank of Korea, said at an online conference hosted by the Hungarian National Bank the day before, “I will adjust the new economic growth trend and pursue policy stability. We will balance economic growth stabilization and risk aversion,” he said, suggesting austerity.
These opinions are also passed down by Chinese observers. Ma Jun, head of the Finance and Development Research Center at Tsinghua University, who is a member of the People’s Bank’s Monetary Policy Committee, stressed that “we must take a serious look at the rapidly increasing debt problem.” He also suggested that the government should “make macro-policies such as employment stability and monetary expansion control the main targets” rather than growth rates.
Meanwhile, the Chinese stock market plunged due to concerns over whether the Chinese government has turned to tightening. On this day, the Shanghai Composite Index closed at 3,569.43, down 1.51% from the previous day. The drop was the highest since December 22nd (-1.86%) last year. Hong Kong’s Hang Seng Index also plunged by more than 2%./Beijing = Correspondent Choi Soo-moon [email protected]
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