Last week the People’s Bank of China (PBoC) cut the overall required reserve ratio (RRR) by 25 basis points (bps). PBoC claimed officially that an amount of 530 billion Yuan or equivalently 83 billion USD capital would be released. This sounds a huge amount. Imagine, without any interest rate cut or extra money printed, such RRR cut can generate an amount of exactly 20% of the first quarter GDP. But the newly released GDP increased only by 1.3% on a quarter-on-quarter basis; even adding inflation to make it nominal it is still way below 20%.
Maybe we should not be that serious about the discrepancies. After all, none of the official numbers are reliable. Yet, these unreliable numbers do reflect over time a consistent or probably reliable downtrend. The downtrend of most economic numbers with the ongoing debt crisis together suggests a series of monetary accommodations is needed, but this is tough against the backdrop of global tightening where local easing would bound to drive capital net outflow. Thus, the only way out is postures rather than deeds: pretend to be instead of actual easing.
…