China Central Bank Refuses To Join Global Print Fest, Warns About Inflation Risks

Tyler Durden's picture

While the entire 'developed' world is now openly engaged in destroying the balance sheet of its assorted central banks - the sole means to devalue local currencies, a liability, by accepting ever more toxic 'assets' as currency collateral - thereby pursuing strategies which until now were strictly relegated to the banana republic playbook, there are some countries who see what is coming over the horizon, and refuse to join the printing frenzy. One such place is China, for whom, as we have repeatedly shown the threat of a fast onset of inflation is far greater (3x more bank deposits as a % of GDP than in the US, means a soaring capital market as a result of inflation will benefit far less while a deposit exodus will cause hyperinflationary havoc in minutes) than any other developed world country. And with the inability to hide "non-core" CPI as a result of food and energy being such a greater portion of overall inflationary bean counting than in the US, it means that despite the demands of Tim Geithner for immediate more easing by China, the PBOC is now stuck waiting to import everyone else's inflation: this includes the Fed, ECB, BOE, BOJ, Korea, Australia and all other bank engaged in adding liquidity, while its own hands are quite tied. Because recall that it was only last year that the NYT said that: "Inflation in China Poses Big Threat to Global Trade." Now we are told that lack of inflation poses the same threat, when in reality what they mean is that with the world tapped out, one more source of marginal liquidity is needed. Judging by overnight comments from the PBOC's head Zhou Xiaochuan that liquidity, suddenly so very needed to keep the game of musical chairs going, is not going to come from China just as we have warned for months on end.

From Reuters:

China's central bank governor has warned that quantitative easing policies worldwide could cause inflationary risks, state news agency Xinhua said on Saturday.


The remarks by People's Bank of China (PBOC) Governor Zhou Xiaochuan come even as analysts credit policy easing from G4 central banks - the U.S. Federal Reserve, the European Central Bank (ECB), the Bank of Japan and the Bank of England - in the third quarter of the year as underpinning business confidence.

Ironically, unlike before when the West benefited from Chinese easing during periods of stress such as in the Lehman aftermath, this time around it is China who is sowing the fruits of others' relentless easing tactics. Only last night China reported that its trade surplus came well ahead of expectations, at $27.7 billion versus a consensus of $20.5 billion, with exports coming coming nearly double the expected 5.5%.

Chinese data on Saturday offered a sign that G4 policy easing was being felt in the world's second biggest economy, with trade numbers showing exports grew at roughly twice the rate expected in September while imports returned to the path of expansion.


"The data shows both imports and exports are improving - especially a rebound in export growth reflects a rising confidence after the U.S. and European countries launched further easing policies last month," said Xue Hexiang, an analyst at Guotai Junan Securities in Shanghai, after the trade numbers were released.

In other words, China is now perfectly happy with the status quo, and is delighted that for once it does not have to be marginal provider of global growth impetus. Instead, it will continue resorting to ultra short-term liquidity intervention strategies such as a reverse repos, which it has been doing for the past several months, and will do no RRR or rate cuts for as long as the threat exists that some other bank will do it for them.

Across Asia, central banks are wary about the potential inflationary impact of the Fed's latest quantitative easing, dubbed QE3, as well as policy stimulus unveiled by the ECB.


Central banks "should consider draining excessive liquidity injected into the market and eliminate inflationary pressure in the long-term", Zhou was quoted as saying by Xinhua, which cited the Journal of Public Research, a magazine published by the People's Bank of China.


China's central bank said in September that it would "fine tune" policy to cushion the economy against global risks while closely watching the possible impact from recent policy loosening in the United States and Europe.

The bottom line is that those waiting for China to come in and provide that last bit of momentum to take the S&P to its all time highs, will be waiting, and waiting, as such an intervention will not come. Why? Thank the Chairman, whose open-ended easing has effectively taken out an even great short-term stock market growth driver, China, out of the picture. And judging by the recent market move, in which the entire QE3 jump has now been faded and then some, Bernanke better have some more magic up his sleeve, ironically, magic which will make any additional "developed world" easing that much less likely.

And just as the permabulls were hoping for once they would be right with their 1650 year end S&P forecasts...

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LULZBank's picture

Leave us out of it Bitchezz!!!

jekyll island's picture

What a difficult decison for the communists.  Do they join the West and print money or position themselves to replace the FRN$ as the world reserve currency?   China's energy demand will not go down and the price of oil will probably never reach $40/bbl again.  This is why China has been buying all that gold.  

kaiserhoff's picture

What elections?  What free speech?  What private ownership?

How many private citizens own GUNS??????????????????

3rdgrader's picture

U.S. Politicians and Judges are the real Communists

malikai's picture


Referring to the CCP as "communists" is just silly.

Paul Bogdanich's picture

This is just silly.  When things begin to cause problems in China, China will deal with them through devices like capital controls and other similar measures which are very effective but anenthema to neo-liberal Western religion.  As of today the cost benefit analysis does not support the imposition of such measures but as sson as it does they will do it.  They are not idiots like our political class.   

OneTinSoldier66's picture

So what you're saying is that smart people impose capital controls... through the use of force, coercion, and if necessary, violence?

kaiserhoff's picture

OK, let's just call them tyrants and gangsters.

Want to lead a protest in Tiananmen Square?  Go for it.  I'll hold your coat.

kaiserhoff's picture

I always get my financial advice from arrogant commie pencil-dicks, but this could be helpful.

Anyone opting out of the race to the bottom for currencies puts more pressure on the greater fool theory for bonds.

hedgehog9999's picture

Absolutely, the west is playing into the hands of the Chinese just as England and Europe played into the hands of the Americans in the first half of the 20th century.

Back then the Americans waited for both wars to decimate all the players and they came in at the end as saviors while gaining ultimate economic power in addition to military power. They kind of did it again to the Russians when the Soviet Ubion collapsed. Now is the Chinese's turn, all the wars and profligacy of the US Government are weakening them while they quietly sit back doing deals in Africa , SouthAmerica and elsewhere which has strengthened them economically and by extension militarily.

While the West continues to decimate ther currencies, they will strengthen ther currency by refusing or at least slowering the pace of the Easin QE fest this time probably with a view to making the Yuan a reserve currency... that way they can afford to import more pork, food and energy from other countries as a bigger percentage of their domestic household budget is food and energy as they eat and drive unlike the US.

cowdiddly's picture

You sir, Have got the light bulb on. See post below. +1000

WTFx10's picture

It has nothing to do with fake sovereign country's because there are only a few true sovereigns. America,England & EU countries are an illusion of sovereignty. The Central criminal banks own them and the people are lead to believe they control them. A perfect plan for the owners.

If you believe anything else your part of the problem.

At their extremes, neither communism nor fascism nor corporate capitalism are much different, as they both become extractive for the benefit of a small elite at the expense and misery of the people.

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

John Dalberg Lord Acton

“The men that American people admire most extravagantly are the most daring liars; the men they detest the most violently are those who try to tell them the truth.”  HLMencken

The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks. John Dalberg Lord Acton

    "Banking was conceived in iniquity and was born in sin.
    The Bankers own the earth. Take it away from them,
    but leave them the power to create deposits,
    and with the flick of the pen they will
    create enough deposits to buy it back again.
    However, take it away from them, and
    all the great fortunes like mine
    will disappear and they ought to disappear, for
    this would be a happier and better world to live in.
    But, if you wish to remain the slaves of Bankers
    and pay the cost of your own slavery,
    let them continue to create deposits."

    --- Sir Josiah Stamp (1880-1941)

    President of the Bank of England & 2nd richest man in Britain

    Source: Speaking at the Commencement Address of the University of Texas in 1927

    “Truth hurts. Maybe not as much as jumping on a bicycle with a seat missing, but it hurts.”

                                      -Naked Gun


hawk nation's picture

I still think when the collapse comes the central bankers who think they will gain control will be marched out and shot by the communist/muslem extremist faction that are currently working with them

LawsofPhysics's picture

Riiiigggghhhht, because the China is being complete honest.  FAIL  A billion people is a lot of people to feed.  I guess that I (and all the other American Farmers) simply need to stop selling to China unless they pay us in GOLD.

Try again.

malikai's picture

It's just as bad to sell in U$D.

But you're right though. It will end up at gold.

Regardless of what talking heads say.

Marco's picture

They need food, we need oil ... that they produce mostly luxury goods is not a great position to be in ... but in the end if you're not both food AND energy independent you're simply not independent, and that's where most of the world is.

LMAOLORI's picture



Bingo who the hell believes the numbers coming out of China? They do the same thing as bernanky panky anyway they talk about stimulus the stocks rise rinse, repeat and in between they stimulate they just had stimulus in September.

Are Chinese Banks Hiding “The Mother of All Debt Bombs”?

How Stimulus Spending Threatens Social Stability inChina

jekyll island's picture

Do you ever wonder why the soviet union collapsed and disappeared without an uprising or violence?  That is NOT the way totalitarian rule has ended throughout history.  

Just Ice's picture

because the people did not have a dependency upon the state for their well fact they were lucky if and when they could get anything "to which they were entitled" out of the state...they had no choice but to count upon themselves and under miserable conditions of rats and snitches everywhere "saying something" whenever they "saw something"...the government collapsed and the people lost nothing of much import or value

LMAOLORI's picture



I don't wonder it's because they were disarmed fighting back was futile thousands were slaughtered and that should be a good lesson for Americans never give up your arms.

 "Those who cannot remember the past are condemned to repeat it"

George Santayana

Hitler vs. Stalin: Who Killed More?

Marco's picture

Of course they only got into the position they are by printing more than anybody else for a couple of decades ...

Just Ice's picture

...and the yuan will be a reserve currency when even the Chinese do not trust it to freely exchange or to be floated without the dollar peg umbilical cord

jekyll island's picture

Yeah, even linked to gold I wouldn't trust them.  I agree with Timmay, China is probably the second worst currency manipulator in the world.  

kaiserhoff's picture

Just as America came into the wrong side of the first world war.

There.  Fixed it for you.

VonSalza's picture

LULZbank Pls  give us sheeple Free monies with negative intrest

LULZBank's picture

Do you have any shitty MBS investments portfolio?

Surrealist's picture

Apparently China have just reported impressive export figures. Reckon this might have something to do with their reluctance to launch stimulus? 



cowdiddly's picture

Its called Check mate in chess. The West has committed to printing money. China's main objective is to replace the petrodollar with its own currency. Switching to make their currency strong gives it the power to buy more gold faster with a stronger yuan,thus obtaining the necessary gold backing only that much faster.

 The boobs in Washington are stuck trying to hold gold down to keep from looking bad and dilute the currency to try to inflate their way out of the debt load that no one wants any more, only aiding the process of the wealth heading East. The circle jerk of the fed buying 60%-70% of their own offerings can only go on so long.

Now watch what a cornered dog does. Out of desperation it will try to draw China into some sort of war either in Syria or the South China Sea where all the carriers are stationed.

Congrats Wahington and the EU its your move you checker playing chumps. You've been punked.

LawsofPhysics's picture

Well in that case I guess I will be asking for gold and silver in exchange for all my agricultural products.  2 billion people is a lot of mouths to feed.  Good luck China.  America is not cornered idiot, being stupid, yes, but hardly cornered with plenty of natural resources and the world's largest military force.  Time is indeed running out on the circle jerk, but what exactly do you think is going to happen when the collapse comes and all those veterans return to their home towns and cities in the country where over half the population is a proud gun owner?

Grow up, get out of the basement already.  The shit you are saying is the exact same thing that was said 20 years ago when Russia imploded.  "China was going to move in and take it all over".  Tell me, what happened there dipshit?  The russians lost everything, the ruble was crushed (as will be the dollar), but guess what, people learned to live within their means and russia and the russians are still there.

Why is it that people are so stupid to think that just because a country goes broke that somehow the actual fucking people "dissappear" and another country can simply walk in and take what they want.  Grow the fuck up and go read some fucking history you stupid fucking sheep.  You'd think that kids today want to be slaves at Foxconn or something making "icrap" all day and chatting on their social media devices but creating nothing of real fucking value other then soylent green.

Stupid fucking sheep.

cowdiddly's picture

You are the stupid fucking sheep. Nothing against the American farmer as I am one myself of sorts. But,If you think that the world will end if the US does not sell that shriveled up 2012 GMO corn crop you are sadly mistaken. Maybe you do not understand who the real agricultural Superpower is today. BRAZIL you idiot. Number one producter of soybean, corn, citrus, blackbeans, coffee and about ten other crops. All with only 8% of available land currently under production. Look it up. Putz.

Funny it was just last month that China and Brazil announced they were going to use their own currencies for trade and expand their trade rapidly.

Get out of your cave and do some research before you start thowing uninformed drivel. DIPSHIT

LawsofPhysics's picture

So you don't want to address any of the real issues?  Again, the russians are still there, survived just fine dipshit.

Unless the any currency is backed by something fucking real it will not fucking matter.

Will China and Brazil be backing their currencies with gold? with oil?  with silver?  So what you are saying is that the paper promises of these  countries will be much better than any other paper promise?  Bah ha ha ha ha ha ha...


Drivel indeed.

aminorex's picture

Given the rate at which China is buying gold, I'm happy to grant your point, and note that the Yuan is increasingly well backed by gold (and guns, and industrial supply chain, and technology).

e2thex's picture


Brasil has a problem with LATERITIC soils-----high iron and high aluminum content.  It will take awhile before they turn their farming areas into red clay tennis courts but it's inevitable. Amending these soils with fertilizers creates a slippery slope as well.

Growing a crop is one thing and being able to sustain it generationally is another.

cowdiddly's picture

Agreed sustainability on Amazon soils might become an issue but at the current rate of growth, Brazil has rapidly overtaken the world in agriculture and they are just getting started.

   I guess they could always host Wimbleton in the event it does not work out.:^)

Offthebeach's picture

2 billion food? Isn't China exporting food, fish, even some wheat or corn?
Besides, Africa awaits. ChinaFarmCo, Inc or something could afford a million man Chinese security/engineering army on a 500x500 mile plantation no problem. Think Foxcom goes into farming.
All your foods are belong to us.

LawsofPhysics's picture

There are more people playing in Africa than China, or do you have some evidence to actually present to the contrary?


When all the government manipulated fiats fail, the conversation will return to "what are you giving me of real value in exchange for my labor or my product? and ultimately the conversation comes back to something real like gold, silver, oil, corn... etc."

Arguing that exchanging any other fiat is going somehow be a "better system" is beyond stupid. 

Mad Mohel's picture

Who gave the farmer an internet connection? Someone get this kid a helmet before he hurts himself.

SWIFT 760's picture

LoP, SSDD. You sound like a broken record with imbecilic name calling, belittling...what is it anyway with you, basements and sheep?

Russia is still there amongst rampant corruption. US banks rarely trade paper with Russian banks its that bad. Banksters fearing Russian banksters. 

You sound the same as USrael gvt's...everything resolved via military. At least the chinks don't send in their 5th fleet to resolve economic issues. 

You need to grow up or get the "fuck" outta here. 

disabledvet's picture

Hold gold down? You mean hold everything down. "change is illegal" it would seem. Yet going full on USSR here has of them is the continued existence of a private sector. I'm still not convinced the Fed has cured us of that. At least not yet. Clearly the rule of law has been annihilated tho. Wasn't it no less than Paul Volker himself who said publicly as i recall "what the Fed has done is illegal" while at the same time not having a problem with? Can someone please explain what the plan for beginning to "pay it forward" will even work let alone where it will come from? Let me guess..."ignoring it really makes it work better."

LawsofPhysics's picture

Having done business in Russia for almost ten years after the collapse, your concern about the "private sector" is confusing.  Do you mean a "private sector" that gets bailouts from the taxpayer?  If so, that is not capitalism, that is kronyism and I don't fucking want it.


The truly private make it-on-our-own sector did just fucking fine post collapse in Russia.

slaughterer's picture

Tyler is right, PBOC cannot print.  But they can do other sneaky things.  

LULZBank's picture

Art of the Shadowless printing?

BurningFuld's picture

Of course they can say that. They have a trillion dollars of US bonds that they are just now making an excuse to spend. Watch out below.

In other news did anyone catch Sheila Bair on Bill Maher saying what a massive bubble bonds were?

kaiserhoff's picture

Now she gets some religion.  Why didn't she mention this when she ran the FDIC, and why doesn't she comment on the obvious implications for bank melt-downs?

The big unzip's picture

Now that's what I been talking about!

bankonzhongguo's picture

What is amazing is that China has the capacity to ignore the rest of the burning world and simply provide the financing (like the World Bank and IMF) to Africa and the non-coastal regions of China and purr along like nothing has happened.  The only thing is the internal inflation monster lurking inside China and all those Goldman Sachs brainwashed Chinese bankers that are ready to split China into the Waring States.

the 300000000th percent's picture

Wow thats not playing nice. If China was a little country like Iraq or Libya they would be bombed for this. So i guess their currency will rise now against all the other "race to the bottom" currencies. Well i guess thats good considering that the yaun needs to be the next world reserve currency. Its all happening


LawsofPhysics's picture

Will the yuan be backed by gold? or oil? or coal? or silver? or anything real?  Will this state-run communist government open their books to the world?  will they allow mark to market rules to return.

This is what will be required or any reserve currency moving foward.  Otherwise this is just simply more paper promises that will not be kept.-- FAIL.