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China holds firm to its US$5 trillion anchor while Fed, ECB seek exit

Bloomberg Published on Mon, Jun 12, 2017 / 8:02 AM GMT+8

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(June 12): Investors who fret about when and how global central banks will run down their crisis-era balance sheets can be relaxed about the biggest of them all – China’s.

Whereas the Federal Reserve’s US$4.5 trillion ($6.2 trillion) asset pile is set to be shrunk and the European Central Bank’s should stop growing by the end of this year as the outlook brightens, China’s US$5 trillion hoard is here to stay for the time being – and could even still expand, according to the majority of respondents in a Bloomberg survey of People’s Bank of China watchers.

The PBOC balance sheet is a fundamentally different beast from its global peers – run up through capital inflows and trade surpluses rather than hoovering up government bonds – but it still matters for the global economy. Changes in the amount of base money in the world’s largest trading nation are having a bigger impact than ever, making the variable key for stability in a year when political transition in Beijing is in the cards.