SINGAPORE (Sept 23): It is debatable whether the US Federal Reserve has sense, vision or “guts”. But one thing is certain: The US central bank has become a weakling. The People’s Bank of China, on the other hand, is loaded with technocrats on steroids.

The Fed’s prestige took a hit recently. Its most powerful regional reserve bank somehow botched a critical market rescue operation — its first overnight repurchase agreement operation in a decade. Monitoring supply and demand in this key funding market should be routine; yet, embarrassingly, the Fed’s main rate shot above its targeted range, just when central bank officials were convening for their monetary policy meeting. The New York Fed will follow up its US$75 billion ($103 billion) emergency liquidity injection with another equally sized chunk on Sept 19.

By contrast, open-market operations have become commonplace for China’s central bank, which actively manages liquidity to its liking. That is less a signal of the PBOC’s draconian grip on the market and more indicative of its increasingly sophisticated efforts to ensure things run smoothly. Since a funding crunch in January 2016, the PBOC has given itself the flexibility to conduct such operations on a daily basis, up from twice a week. There are 49 primary dealers, mostly banks, that carry out the central bank’s bidding.

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