The People’s Bank of China (PBOC) governor Pan Gongsheng’s accommodative monetary policy plans sparked a market rally, earning him the nickname “China’s Greenspan”. However, the PBOC now faces challenges balancing economic support with stabilizing the yuan. The governor must deliver results before being compared to Greenspan.

China’s economy is experiencing persistent deflationary forces, with low inflation and a struggling property sector. The PBOC’s policy easing aims to stabilize the economy, but high levels of debt pose a dilemma. The governor must navigate this complex situation to achieve stable growth and debt levels.

Chinese 10-year bond yields are near record lows due to low inflation, leading to inconsistent policy responses from the PBOC. Foreign investors are wary of China’s monetary policies, which aim to avoid a Japan-like economic scenario. Clearer communication and market engagement are needed for transparency and stability.

The PBOC is managing a slowing economy, deflation risks, and debt concerns while aiming to liberalize capital markets. Gradual monetary loosening through interest-rate cuts and balance-sheet policies is the strategy. Strengthening communication can help stabilize markets and build credibility for the central bank.

Read more at Yahoo Finance: A Q&A with Scope Ratings’ Dennis Shen