China Press: Policymakers need to tread carefully when tightening policy to avoid liquidity crunch

Caixin’s editorial piece today highlights the need for the Chinese policymakers to remain cautious, when tightening the policy, in order to avoid a liquidity crunch.

Key Quotes:

“As the government’s clampdown on financial leverage ripples through markets, billions of dollars in value have been wiped out from stocks and bonds and banking and insurance sectors. This is likely to cause a liquidity crunch. Policymakers should consider using monetary policy tools to cushion the impact from their efforts to cut financial leverage.”

“Although the goal of tighter supervision is to mitigate risks, this should not get in the way to implementing bold reforms. Policymakers should aim to keep long-term risks under control, while plugging black holes that drain money out of the real economy.”