China must ‘liberate’ mind, embrace primary market treasury-bond purchases by central bank: finance ministry researcher
- China’s central bank is set to participate in treasury-bond trading in the secondary market following an instruction by President Xi Jinping
- But a prominent researcher affiliated with the Ministry of Finance says purchases in the primary market should be made to ‘achieve fiscal and financial coordination’
While the resumption of China’s central bank’s treasury-bond trade has stirred fierce debate over Beijing’s leaning towards quantitative easing, a prominent researcher affiliated with the Ministry of Finance has called for purchases in the primary market to foster better alignment of fiscal and monetary policies.
“We must liberate our minds in terms of operating restrictions in the primary and secondary markets, otherwise it will be difficult to achieve fiscal and financial coordination,” Liu Shangxi, head of the Chinese Academy of Fiscal Sciences which is affiliated to the Ministry of Finance, told a closed-door academic gathering on May 9.
“The central bank’s buying and selling of government bonds is conducive to better playing the role of finance in the monetary policy transmission mechanism,” according to a transcript of his speech published on the website of China Finance 40 Forum on Monday.
Liu is a member of the Chinese People’s Political Consultative Conference, the country’s top political advisory body, and also sits on such organisations as the Chinese Economists 50 Forum.
The primary market is where new securities, including stocks and bonds, are issued and sold for the first time, while the secondary market is where already issued securities are bought and sold by investors.
