** Reverse operation of bond's purchasing may be significantly limited in a downturning economic circumstance.
** Price appreciation can be determined by where the printed money goes.
** There is an increasing demand for global purchasing by US dollars earned by China exportation.
If the bond's purchasing of central bank can help boom stock market, the reverse operation of bond's purchasing harms. To convert US dollars earned by its exportation, China's central bank usually turns to issue "notes" to raise RMB. However, this constant demand for borrowing RMB inevitably creates huge pressures on its stock market.
When the bond issuance is not sufficient or feasible China's central bank has to depend on printing RMB to convert the US dollars from its exportation. However, because their corresponding goods have been moved from China's market, the additional RMBs printed inevitably push up the price of goods, services, and some types of assets in the domestic market.
Our model indicates that there have been increasing demands for those US dollars earned by China exportation to buy goods and services globally.
RFQ is devoted to modeling the additional money's impact on price.