Watch Chinese Central Bank Actions, Not Talk

The Chinese often operate in nuanced ways. Their central bank policies for influencing interest rates, for example, often use methods to influence interest rates that are not as clear as those used in the developed world. Last week’s People’s Bank of China (PBOC) rate hike, which has not resulted in tighter monetary conditions, is but one example. “Investors should be cautious about interpreting interest rate changes in China using the same framework they apply to central bank actions elsewhere,” Capital Economics noted in a December 21 report.

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PBOC doesn’t use REPO rate as quantitative measures target goals

The PBOC has not made a full transition towards targeting intrabank rates as is commonly...