Talk of Chinese QE Is Pure Speculation, Completely Delusional

So says Yu Feng Hui in 中国版QE纯属臆测

A background, the current A-share is highly leveraged, awash with liquidity, speculation as historically rare crazy hot. Operator to maintain this situation, one approach is to continue to reap huge profits continue to release even fictional, innuendoes walk "good" news. After a major restructuring of central enterprises mergers and acquisitions news is rumor, and then began the "Chinese version of QE" new left-fried, its villain is obvious. Similar changes in monetary policy instruments news for capital markets will have a direct impact. Such false news if not clarified, it will cause the stock market 's greater volatility.

Little attention to China's monetary policy characteristics, trends and evolution of people, are able to see at a glance the so-called Chinese version of QE is completely fabricated and concocted for some purpose. Chinese version of QE is completely delusional.

This next part is good:

From the legal aspect is concerned, "PBOC Law" stipulates that the Bank shall not provide financing directly to the Government. If the central bank were to directly buy bonds issued by the government, bonds with no "material guarantees" (no output of goods and services behind them), it puts money directly to the market, eventually brewing inflation, plundering the wealth of the people. Local government debt the central bank issued the first direct purchase of local same. Is the Fed's rounds of quantitative easing, but also through open market operations in the secondary market rather than in the primary issuance market to buy bonds directly.

In a strict sense, whether it is [central] government bonds or local government bonds, the central bank and commercial banks not only can not purchased directly, nor distributed in the inter-bank market. Instead, bonds should be directly issued businesses and individuals in the market. This is because to issue bonds in the inter-bank market, to allow commercial banks buy, will raise suspicion that the central bank is covertly financing the government.

Yu concludes by saying there's no need for Chinese QE. The government can increase liquidity by reducing reserve requirements, which were around 12% in the 1990s, much lower than the current 18.5%.

China will not (should not) do QE because it is illegal and will destroy the wealth of the people via inflation induced by direct central bank funding of government spending. In other words, China currently has more legal protections for its people than the United States. Does that mean the PBOC and central government won't decide extraordinary times call for extraordinary policies? Maybe not, but it would be very ironic if the often legally ambiguous Chinese regime were to uphold legal restrictions on their central bank after much of the developed world has abandoned them. It would also be a very important in terms of long-term economic leadership.

What Yu doesn't go on to say is that should forex reserves continue to fall, draining liquidity from the financial system, and the government responds by lowering the RRR, the renminbi is likely to depreciate.