China state media posts questions about PBOC easing

A social media account of the official mouthpiece of China's ruling Communist Party questioned the central bank's recent move to cut the amount of cash banks must hold as reserves. The People's Bank of China (PBOC) on Monday reduced the reserve requirement ratio by 50 basis points to 17 percent. The ratio has been lowered five times since February 2015.

"If this capital continues flowing into fixed assets and financial assets, not only will it continue inflating the asset bubble, it may also drag down business efficiency as companies struggle with a lack of liquidity," according to an article posted in Chinese on a verified WeChat social media account run by the overseas edition of People's Daily.

"The worst outcome would be stagflation - economic growth stagnates and the money that the central bank used to stimulate the economy leads to inflation," a People's Daily reporter wrote in the article posted on Wednesday.

The post carried a byline with the name "Ming Ri Ling Bo". When contacted by Reuters, People's Daily said the post was written by a reporter at the newspaper but declined to identify the reporter. It is rare for journalists from the Communist Party's flagship newspaper to use an official social media account to question a major PBOC monetary policy move.

China's President Xi Jinping recently told official media to toe the party line, and high-profile online commentators had their social media accounts blocked.

Chinese state media must uphold the "correct guidance of public opinion" and promote "positive propaganda as the main theme", media reports paraphrased Xi as saying. The key to resolving problems in China's real economy involves "supply-side reform", the article said, referring to the government's latest push to, among other things, tackle overcapacity in heavy industries including steel and coal and destock a bloated real estate market.