Chinese central bank should dodge bond buying: adviser

It could lead to inflation and the depreciation of the yuan.

An adviser believes that the People’s Bank of China (PBOC) should avoid buying special treasury bonds as it could spur inflation risks and asset bubbles and lead to the depreciation of the yuan, reports Reuters.

“Although the epidemic has caused a short-term impact on China’s economy and fiscal revenue and expenditure, the economic recovery momentum has been quite obvious since the second quarter, and fiscal revenue and expenditure will gradually improve,” policy adviser Ma Jun told Financial News.

The amounts of special treasury bonds and local government special bonds issued this year could not be too big, and they could be handled by the existing policy framework, Ma added.

China’s leaders have pledged to take more steps to support the economy, setting off a heated debate amongst economists and advisers over whether the PBOC should monetise its fiscal deficit through quantitative easing.

Here’s more from Reuters.