In an op-ed published by Barron's, CQS' Sir Michael Hintze and Bunt Ghosh discuss the likely impact of China's version of Quantitative Easing (QE):
Like many market participants we at CQS are keen China watchers. We believe China will not devalue the Yuan and that markets do not appear to appreciate China's determination to have a fully convertible currency and how tight a monetary policy the People's Bank of China (PBoC) has been running over the last five years. On the last day of the year in 1993 the PBOC devalued the Yuan by just under 50% from 5.76/US$ to 8.62/US$. There is a view that the risk that they will do so again has risen substantially over the last year as the Chinese economy has slowed and many investors perceive the recent cuts in interest rates and FX band widening as a precursor to the event. We believe that this expectation is wrong. What we are now seeing is Quantitative Easing (QE) on Chinese terms, which is likely to continue to support China's fixed income and equity markets.
In the op-ed, Hintze and Ghosh also address the strategic considerations driving Chinese economic policy and the monetary conditions that set the context for these policy decisions.