Central bank may attempt to redirect money flows to real economy

The People’s Bank of China is exploring ways to lower high long-term borrowing costs by pushing down yields on longer-term bonds and mopping up excess short-term funds, Reuters reported, citing an unnamed economist who advises the government. Banks have remained reluctant to make long-term loans to businesses despite easing measures taken by the central bank to date, including interest rate cuts and raising limits on bank lending. Instead, money seems to be flowing into the ongoing equities rally. “The central bank could inject more long-term liquidity in order to guide the money into the real economy, while keeping a lid on short-end cash,” the economist said.