What’s new: China’s central bank said it has completed the transfer of 1.13 trillion yuan ($162 billion) in profits to the finance ministry to help the government boost fiscal spending and support the economy.
The size of the funds is equivalent to around a 50-basis-point cut to the reserve requirement ratio, the People’ Bank of China (PBOC) said in its quarterly monetary policy report published Friday.
The funds, which are mainly income generated from the nation’s foreign exchange reserves over the past few years, were spent primarily on tax refunds for companies and the central government’s transfer payments to local governments, the central bank said.
The background: Plans for the profit transfer, disclosed by the PBOC nearly a year ago, ignited a discussion on whether the move constitutes a monetization of fiscal deficits — when the central bank prints extra money for the government to spend.
The PBOC previously emphasized that the profit payment is not a form of fiscal deficit, and that the finance ministry is not extracting excessive profits from the central bank.
The central bank said it is also not the first time that it has handed over its profits to the finance ministry, and the move highlights how monetary policy is being used in coordination with fiscal policy to stabilize the economy.
Related:
Caixin Explains: Why China’s Central Bank Is Handing Over 1 Trillion Yuan to Treasury
Contact reporter Kelsey Cheng (kelseycheng@caixin.com)
Get our weekly free Must-Read newsletter.
