Jan 10, 2019 07:09 PM

Opinion: China’s Central Bank Shouldn’t Be Buying Stocks

Photo: VCG
Photo: VCG

Speculation has flared up that the People’s Bank of China (PBOC) is considering buying stocks. But there are no valid reasons for the central bank to buy shares directly or through exchange-traded funds (ETFs) that track indexes or baskets of stocks.

Under the law that governs the PBOC, the central bank can buy and sell treasury bonds, other government bonds, bonds issued by financial institutions, and foreign exchange on the open market. In theory, there’s no legislative barrier preventing the central bank from purchasing stocks or ETFs. But whichever way we look at it, the PBOC has no reason to undertake such an endeavor.

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