Standard Chartered economist Stephen Green:

  • The CNY1 trillion in Pledged Supplementary Lending (PSL) that the People’s Bank of China recently conducted in the market “smacks of quantitative easing”
  • The funds which have been relent to China Development Bank are “deliberate and significant expansion of the PBOC’s balance sheet via creating bank reserves/cash”
  • He likens the exercise to the UK’s Funding For Lending scheme
  • Says that the CDB’s balance sheet reflects the transfer of funds, even if the PBOC’s doesn’t
  • The CNY1 trillion reported — no details confirmed by the PBOC yet — will end up in the broader economy, will boost demand and “sends a signal that the PBOC is in the mood for quantitative loosening”
  • He says that the impact will depend on whether the details are correct and if all the funds have been transferred already, or if it’s just a jumped up credit facility that CDB will be allowed to tap in stages