Over the past year, the central bank of China has adopted several new monetary instruments. According to some market analysts, those monetary instruments, whether in the form of SLO plus SLF (Short Term Liquidity Operation plus Standing Lending Facility) or PSL (Pledged Supplementary Lending), are in fact a loose monetary policy, or the Chinese equivalent of QE (Quantitative Easing).

Yin Jianfeng, director of the Structured Finance Research Office of Chinese Academy of Social Sciences, disagrees. He thinks that although the central bank of China has adopted several strong monetary policies recently, the scale is much smaller than that of QE.

Sun Huayu, vice dean of the International Business School of Jinan University said: "China will not issue excess currency in a comprehensive way like the west. The QE of the west is general, not directional." The central bank has said repeatedly that China is maintaining a prudent monetary policy and in particular that the money supply will not be increased. To solve structural problems in the economy, financial support will go to priority areas.

According to Sun Huayu, China has no need to issue excess currency since the economy is stable with signs of recovery after the implementation of mini-stimulus measures.

Wen Bin, chief analyst of China Minsheng Bank, said that the key point of China's monetary policy is to effectively lower the cost of social financing. On the one hand, the money market rate has to be kept at a reasonable and stable level through repurchase, reverse repurchase and other measures; on the other hand, credit funds should be guided to priority areas by adopting policies such as targeted RRR (Reserve Requirement Ratio) cuts.

According to Zhang Ming, director of the International Investment Research Office of the Chinese Academy of Social Sciences, in order to achieve the goal of 7.5 percent GDP growth the Central Bank of China may adopt targeted RRR cuts or even interest rate cuts in the second half of the year. 

The article is edited and translated from《货币供应不会搞中国版QE》, source: People's Daily Overseas Edition, author: Luo Lan.