Thread by @ChinaFinance40

Countries are extremely easing monetary policies, slashing interest rates and RRRs, to counteract the pandemic' blows on the financial market and real economies. #QE will inevitably expand the balance sheets of central banks, but it won't necessarily speed up total credit growth.

The massive easing of developed countries will spill over, especially to emerging markets: its income effect stabilizes global financial market and promotes economic pickup; but its relative price effect hampers capital flows and exports of emerging markets.

For now, the income effect is stronger in China than the relative price effect, which hasn't placed much upward pressure on RMB yet.

The easing is expected to continue for long. Macroeconomic policymaking depends on whether the virus can be contained. Meanwhile, the extraordinary countermeasures amid crises usually find it hard to exit properly.

It's guessed that the new global economic landscape would feature low interest rates, low growth, low inflation, high debts and high asset prices.
Based on this assumption, the following things are proposed to deal with the situation:

1. #China should adjust #interestrate based on domestic economic situation;
2. Keep its #exchangerate flexible, give it full play as automatic stabilizer;
3. Facing the increasing strain on capital flow and RMB exchange rate, the key is countercyclical management of capital flow;

4. Domestic financing of Chinese real estate enterprises should be liberalized, and that will suppress carry trades.

By CF40 Senior Fellow Zhang Bin:
mp.weixin.qq.com/s/DfLFMg2Wxan4…