China’s PBOC: From Tapering to Easing?

The whimsical actions of China’s PBoC serves as roadmap to what central bankers will do once the pain in the system from their policies swells enough to threaten the survival of their political institutions.

From Bloomberg:

The People’s Bank of China added 50 billion yuan ($8.2 billion) to the financial system yesterday after a cash squeeze drove money-market rates to record highs, said Hao Hong, chief China strategist at Bank of Communications Co.

The sum was supplied to a single lender through short-term liquidity operations and more banks were in talks to obtain financing, Hong said in a phone interview, adding that this is “proper and appropriate” use of the mechanism. Overnight funds were lent at 5.1 percent and seven-day money at 5.4 percent, he said, citing unidentified people in the industry. A PBOC press official said he was unaware of the matter, requesting anonymity in keeping with bank policies.

The purported ferreting out of the shadow banking industry represents no more than token symbolism.

And it would seem that China’s government has commenced on the bailing out of politically privileged institutions via “The sum was supplied to a single lender” 

Such supposed “noble intended” goals of assailing the property bubbles and the shadow banks, are actually responses to the consequences of their previous policies. These appear to have been overshadowed by the imperatives of political stability which would be undermined by a full blown crisis. 

Besides, all these make good publicity especially from a new administration desiring to win the public's approval (except that media conceals the true nature: fighting monsters of their creation)

Nonetheless, at a certain point, no amount of easing will be enough to prevent the laws of economics from ventilating on the accrued unsustainable imbalances brought about by massive interventionism in the marketplace.