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China Launches CNY500 Billion In "Stealth QE"
It has been a while since the PBOC engaged in some "targeted" QE. So clearly following the biggest drop in the Shanghai Composite in 6 months after some abysmal Chinese economic and flow data in the past several days, it's time for some more. From Bloomberg:
- CHINA’S PBOC STARTS 500B YUAN SLF TODAY, SINA.COM SAYS
- PBOC PROVIDES 500B YUAN LIQUIDITY TO CHINA’S TOP 5 BANKS: SINA
- PBOC PROVIDES 100B YUAN TO EACH BANK TODAY, TOMORROW WITH DURATION OF 3 MONTHS: SINA
Just as expected, the Chinese "derivative" currency, the AUD, goes vertical on the news, and the S&P 500 goes vertical alongside:
For those confused what the SLF is, here is a reminder, from our February coverage of this "stealth QE" instrument.
* * *
The topic of China's inevitable financial crisis, and the open question of how it will subsequently bail out its banks is quite pertinent in a world in which Moral Hazard is the only play left. Conveniently, in his latest letter to clients, 13D's Kiril Sokoloff has this to say:
Will the PBOC’s Short-term Lending Facility (SLF) evolve into China’s version of QE? While investor attention has been fixated on China’s deteriorating PMI reports and fears of a widening credit crisis, China’s central bank is operating behind the scenes to prevent a wide-scale financial panic. On Monday, January 20th, 2014, when the Shanghai Composite Index (SHCOMP, CNY 2,033) fell below 2,000 on its way to a six-month low and interest rates jumped, the central bank intervened by adding over 255 billion yuan ($42 billion) to the financial system. In addition to a regular 75 billion yuan of 7-day reverse repos, the central bank provided supplemental liquidity amounting to 180 billion yuan of 21-day reverse repos, which was seen as an obvious attempt to alleviate liquidity shortages during the Chinese New Year. However, it is worth noting that this was the PBOC’s first use of 21-day contracts since 2005, according to Bloomberg. Small and medium-sized banks were major beneficiaries of this SLF, as the PBOC allowed such institutions in ten provinces to tap its SLF for the first time on a trial basis. A 120 billion yuan quota has been set aside for the trial SLF, according to two local traders.
The central bank also said it will inject further cash into the banking system at regularly-scheduled open market operations. This is a very rare occurrence, as it is almost unprecedented for the central bank to openly declare its intention to inject or withdraw funds at regularly-scheduled open market operations. Usually, these operations only come to light after the fact.
The SLF was created as a brand new monetary tool for the central bank in early 2013 and was designed to enable commercial banks to borrow from the central bank for one to three months. Since its creation, however, the SLF program has been used with increasing frequency by the central bank.
The latest SLF is remarkable for two reasons: First, as mentioned earlier, this SLF was expanded to allow provincial-level small- and medium-sized banks, for the first time, to tap liquidity from the central bank. As local financial institutions are usually both the major issuers and holders of local government debt, the expansion of the SLF to include local financial institutions opens a new channel for liquidity to flow from the central bank to local governments. This may suggest that the central bank, which is now on high alert for systemic risk, is willing to share some of the burden of local government, though on a very selective and non-regular basis.
The second key reason is embodied in the following central bank announcement: “[we will] explore the function of the SLF in setting the upper band of the market interest rates.” In other words, in the event that interest rates spike higher due to a systemic crisis, the central bank can intervene, via the SLF, to bring rates back down if it so desires. In addition, the PBOC did not disclose any set cap on the SLF, implying that unlimited liquidity could be provided as long as the market’s rate spike exceeds the bands set by the PBOC.
...
Most important, the SLF appears to represent the PBOC’s strategy to avert China’s widely-publicized local government debt and banking-system problems. It is worth noting that even though local government debt amounts to 30% of GDP and is growing at an alarming rate, China’s central government is relatively underleveraged, with a debt-to-GDP ratio of only 23%, which is significantly lower than the emerging-market average. Therefore, Beijing has considerable unused borrowing capacity to share some of the debt burden taken on by local governments, which would have the additional positive impact of lowering borrowing costs for those governments.
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this can carry on for a loooooong time.
SLF? Is that like a Chinese "Selfie"???
It stands for "jump you fuckers"
Oh see, China is in such great shape! Green bamboo shoots! Pass the MSG.
No doubt these new paper monies will increase the electrical usage and factory activity. Isn't that always the way it works?
Well obviously SUMTING WONG in the Chinese financial system for them to do this right now.
This is being done to float Alibaba long enough for the insiders to cash out.
They're probably just printing up enough to buy what little is left of the West's remaining gold and silver.
and the S&P goes limit up.
gee, 500bn yuan? that#s in $$ terms what the Fed has been doing per month. A rounding error, so to speak.
The USSA will not be outprinted! Man your stations boys. Turn on those presses.
Yaay...
Listen, American. Do you have cancer? Are you sure you don't have cancer. "CANCER". Shouldn't you check to see if you "HAVE CANCER". Cancer is bad and is running rampant in USSA. Everyone in USSA has cancer. Are you sure you don't have cancer?
Waiter, I will have two of what he is drinking.
Listen. It's serious and "DEADLY". Cancer. It will kill you. Don't you know? The cancer is here and is "INSIDE" of you in America. Cancer will kill "YOU". Cancer cannot be avoided in America.
...seems to attack the brain first.
Just saying...
Remember, everything gives you cancer. There's no cure. There's no answer.
https://www.youtube.com/watch?v=1oDAkmfoAgA
Tetons,
Ill join ya! That guys FUCK'd Up.
LOL
RIPS
are you an idiot Bangalore ? Say nothing if you have nothing sensible to say. Been watching your drivel for a while now.
Listen. You defiantly have "CANCER"! Get checked by the doctor. Cancer will "KILL".
Its so popular we now have a TV series. " The Redband Society"
Its what the cool kids are doing. Great for business because we know there is no money in cures only treatment.
Listen. Many already know they are highly "PRONE" or infected with a genetic sleeper cell. That's why they will get pissed at me for saying this.
Your "GOVERNMENT" wants you to get cancer! And you will! It's incubating in your food, air, water, and "THOUGHTS".
You are severely overusing the word: Listen.
Try to gain some credibility before demanding people "listen" to you.
He might have cancer, but you sound like you've had a lobotomy.
https://www.youtube.com/watch?v=rwdc8u93r_w
I have cancer of the brain caused by customer service reps in India.
Listen. This isn't some cavalier comment used to provoke thoughts of fear in the reader. This is a warning sent by someone who knows. Cancer in the USSA is unavoidable.
Don't have it yet? You will...
And Listen! It's a known fact that dogs can "SMELL" cancer in the human. But you Americans ignore the medical advice.
"CANCER" is embedded. In your body, a sleeper cell. Waiting for the opportunity to thrive. "CANCER" is not afraid of you big bad Americans.
You're a classic sock puppet.dotgov who tries to interrupt and slide the comments, disrupting the conversation.
You are the cancer.
Listen. Your fear of "CANCER" is palpable. I understand. Everyone thinks it's "NOT GOING TO HAPPEN TO ME" but one day you stop to think "WHY AM I FEELING SO RUN DOWN?".
"CANCER"? Has it taken hold, "YET"?
Shouldn't you be busy worshiping a cow or something?
so long fu
Takes some of the load off Kevin, now that the Brits have their own little problem.
YEAH BABY!!!!!!!!!!!!!!!!
Yep, in addition, as many have demonstrated, the chinese want absolutely nothing to do with the world's reserve currency. Especially since they have the majority of the world's customers and are quite willing to let the West destroy itself.
Let's all shit all over the currencies. More bogus bucks the elites can buy all the assets up with. We on the other hand will have only a few shreads to wipe our ass with.
Shouldn't wipe your ass with something that dirty...
you'll get cancer! ;-)
Speak for yourself, real wealth/capital comes from ownership and control over productive assets and equity. You really think that the truly wealthy hold the majority of their wealth in currency?
FAIL.
1/3 productive land.1/3 PM's,1/3 fine arts, has worked for a thousand years.
Paper currency is for serfs.
someone sure fucking knew this was coming !
The worst thing that could ever happen is to have "investors" take a loss. Can you imagine the horror?
Wait a minute. QE is OUR WORD. This is racist.
Peanuts.
This is politburo bailing out their own closely run pyramid schemes
Move on. This is nothing
Fed has so far monetized $4 trillion of derivative losses from primary dealers, Warren Buffett etc and still going on through Brussels.
Their bank is run by the same madmen that run ours.
No, they have their own lunatic asylum to screw things up.
About (1) month of QE before it was scaled back.
81,298,860,000.00 US Dollars There goes the aud/usd chewing through those stops @ .9055/60.There seem to be a steady stream of self proclaimed financial experts on ZH who look at China with the underlying assumption that the Chinese banking system is Rothschild controlled and then predict gloom and doom for China. The problem is this assumption is wrong. China owns its central banks and can cancel loans, do QE and issue money interest free without creating any meltdown pressure. This article is as wrong as all the other ones predicting China's pending demise.
Don't confuse the muppets with facts; they'll hate you for it.
Precisely why they don't want the scrutiny of holding the world's reserve currency. this isn't to say they don't know how to allocate capital as this is another thing altogether. far too many people confuse the two as well as money and capital.
It is what it is. In any case, world trade is the only thing that really matters. once that stops, then and only then would any sort "demise" for anyone begin in earnest.
Unlike some of us, most people have not experienced central command in their lives
They, apparently, have not had the pleasure of meeting Mrs. peabody...
I don't think any country printing money out of their asses helps with trade. I sure as hell wouldn't give up anything of value for a piece of paper printed by a government.
Who the fuck can place any value on any of these currencies when they pull this shit? Nothing is pegged to nothing.
Trust? Hahahaha.
It's a race to the bottom, and China has no intention of coming in last. The difference is, when they all do hit bottom, the race to the top will be won by the one holding the gold.
Correct.
China financial system is a wholly owned subsidiary of politburo and communist elite
and of course you believe it acts completely independently of Brussels, or DC right? No coordinated pump here trim there on the printing, right, its all magic.......
That is not a matter of belief. That is reality.
They want yuan to be partial world reserve currency without shooting a bullet.
Chinese and russian oligarchs are at war with western oligarchs
what's the chinese word for 'audit'
I believe it's called 'bribe'.
There is none, they invented paper money and such words have long since been eliminated. Control the language...
" Up against the wall mother.... "
I have an empty city for sale, was called Ordos but I renamed it Forestville. Stupid is as stupid does.
Prospects of war are likely speeding up the counterfeiting by central banks. It is end game. The banks don't ever expect to be paid back.
It's all a farce, no matter where one might be. The reset will be painful but hopefully avoids WWIII. I would be surprised if this system makes it to the end of the year before, kaboom.
... said my father in 1971...
This time is different? :-)
Fuckin hell.
QE for eva bitchez...
QE for eva bitchez...
They take turns... (CBs)...
It's not rocket science...
And through currency swaps markets world wide ramp up. Does it really matter anymore which central banks do QE?
This is like that midway horse race game. Looks like horse number 4 (China) just moved up 5 spots in the race to the end.
"Just when I thought I was out, they drag... me... back... in."
So I would guess EVERY short across the world just got stopped out in everything....
china needs large quantity of cny to ciculate around the world simply as usd.
You fucked up, you trusted us.
To qe, or not to qe, that is the question—
Whether 'tis nobler in the mind to suffer
The slings and arrows of outrageous Fortune 500 companies,
Or to take adjustable rate mortgages (ARMs, get it?) against them?
more invisible hands... just when Macao Casinos tank !
A rumor spread at midnight China time, when their markets and their central bank have been closed for hours, right as our markets falter 2 days before quadruple witching and close to quarter end.
It's becoming surreal - these guys aren't afraid of anything, they do as they please.
China doesn't owe any money outside China.
All Chinese debt is Chinese debt.
They can cancel it all.
Someone forget to look.
China is still COMMUNIST!
You dumb mothers.
But until they cancel it, they create more and more and buy the entire world with the funny money. Everyone wants a piece of that Chinah action and is willing to look the other way. Chinese millionaires seeking residence in North America, mainly the Westcoast. They will give the Mexicans a run for their money. Once Chinese slave masters "hire" the Messicans, they will need a border to keep the illegals here.
boy for a minute I thought that they had energy bills...... good thing they are energy self sufficient.....
China sells production.
Russia sells energy.
Nice fit.
So Russian oil profits go directly to the common man so he can go down to the local Mao-Mart and complete the circle?
How will they get the oil money back from the beach front in the south of France and into the commoners hands?
Wow 12 up votes
Use ZH search for "risky bonds china "
Not that long ago to forget
Well, the important thing is that the correction is over and we can all get back to buying stocks.
build a few empty cities, jack the printers, who gives a shit?
Translation: Well, if you can hit Cntrl-P so can we.
www.traderzoo.mobi
Yellen blow the PBOC?
As a diehard gold and silver bug, all I read is this:
Central banks hokus pokus adding liquidty with this or that "facility" bla bla bla needing more liquidity and there could be shortages so ratatatata make more liquidity bla bla bla... once upon a time there was a...
Maybe this fairy tale will really end in happily Ever Afters for every royalty and its court but I seriously, seriously doubt it.
Stay liquid my friends. They're all cooking with water, creating illusions of wealth from thin air.
WTF 500 billion yuan is chump change compared to the Fed's QE. Why is the market moving so violently?
Because they have millions more bad loans and all of them have to be covered.
You just saw how they intend to fix their mess, this is just starting
They're just doing the same thing as every other country now. All debts will be covered by printing, but with the additional advantage of serving to keep the value of the yuan from rising. In today's "new normal"' it's a win/win strategy. Same as it ever was...
Listen. So many kids in the USSA are getting "CANCER" that "THEY" are creating a TeeVee show to convince the Kids of USSA that's it's "OK TO GET CANCER" no matter your age.
Fine. Now time for you to go wash up and brush your teeth in your sacred Ganges. Watch out for those rotting corpses floating over there upstream...
What the patron saint of gold backed currency would just print Yuan to save its bankrupt banking system.
Tell me its not so....
Notice they covered bad copper loans. Silver is the poor mans gold but copper is the China mans gold. ( at least in business )
On other reserve currency fronts the Rouble is down to .02613 to USD half what it was a few years ago.
What a combo they are. Russia will default on bonds again because of sanctions and Yuan still pegged to USD while it QEs ( the math does not look good on that one )
Beastie Boys - Rhymin' & Stealin' (Official Video) http://www.youtube.com/watch?v=U7M7d8u40I4(on top of their $500B a year US trade surplus)
The amount doesn't matter, market are high just listen to the word "QE", like a drug addicted hears the word "heroin".
Listen. The word "CANCER" is more provocative. Much "MORE".
Subliminal. Suggestive. Sexy.
Next fiat reserve currency my ass.
The Chinese should stick with stuff they know, like Kung Fu and shitting on the side of the road.
Why does a country with supposed yearly GDP growth of 7-10% need QE?
Because bad bank loans grew at 20% per year for 10 years.
That is loans with no real collateral...fake. copper ect
And investment in empty houses that they will not rent out for fear of damage
eg best pigs get the guest room so no one steals them
As I insinuated above, the apparent reasons are just excuses to keep up with the actual decline in Western currencies. In the meantime, the Chinese are pulling out all the stops to stockpile as much gold as possible before the collapse of the dollar really picks up speed.
...RRRrrright...
Why is this supposedly news? The total distributed is less than 81.4 billion $US. Big deal. This strikes me as merely surreptitious China-bashing. Compare this, for instance, to the 29 Trillion $US in funny-money that have been reported as having been pumped into equities by Western banks since 2009.
ICEBERG BABY
Did I mention that the other ninety-percent you don't see is comprised of solid gold?
China reminds me of the Kanimits in the Twilight Zone episode "To Serve Man".
Instead, it's "To Serve Stupid Americans".
Mr. Chambers, don't sell any more Treasuries to China, it's a cook book!
Mr. Chambers smiles back and says, "Yes, I know".
Is Mr. Chambers a Kanimit infiltrator?
So 500 Billion CNY equates to 81 Billion USD, or 6 years worth of Russian NG.
http://www.cbc.ca/news/business/russia-china-sign-natural-gas-deal-worth-400b-1.2649241
".. It is worth noting that even though local government debt amounts to 30% of GDP and is growing at an alarming rate, China’s central government is relatively underleveraged, with a debt-to-GDP ratio of only 23%, which is significantly lower than the emerging-market average. Therefore, Beijing has considerable unused borrowing capacity to share some of the debt burden taken on by local governments, which would have the additional positive impact of lowering borrowing costs for those governments. .."
Local government (municipal) debt is a problem, but I think the corporate debt in China should also be mentioned here. Small businesses very indebted and big companies (for example construction, etc.) also.
The risk on effect today was really the result of this "chinese QE"? Why BBG did not even mention it?
i notice the rates for a date with those ChnloveAsia just went up