Truth out of China?
If only the truth were black and white.
Here's analysis in a note sent to subscribers this morning in which our Macro team pieces together recent comments from the PBoC and the country's state-owned news agency Xinhua to arrive at some interesting conclusions:
"The Shanghai Composite Index dropped -2.3% overnight despite the PBoC injecting 250B of liquidity into the banking system, which represents the largest such injection since February 26th. Weighing on sentiment was a Xinhua report that monetary policy will likely be more prudent in 2016 than it was last year, according to sources close to the PBoC, as well as PBoC Chief Economist Ma Jun commentary about future monetary policy needing to guard against financial risks.
With Chinese corporate leverage high and getting higher (166% of GDP) and property prices running up 30% YoY in first tier cities, we expect the PBoC to rein in the liquidity provision meaningfully from here now that economic stabilization is in the rear view mirror."
More from China's state-owned news agency Xinhua:
"China will continue to implement a prudent monetary policy this year, and, in the context of the economic slowdown, top officials have described the prudent policy as one 'with a slight easing bias.'
As the economy is yet to fully restore its strength, China will not shy away from using the ample tools at its disposal to bolster the economy. But it will be more careful to prevent the easing from going too far."