(Bloomberg) -- The People’s Bank of China will likely buy and sell government bonds — not as a move toward quantitative easing, but to shake off a reliance on banks for funneling cash to the financial system, according to Australia & New Zealand Banking Group. 

The nation’s heavy dependence on banks and their loan books to manage money supply and support the economy “is not as effective as before to boost growth,” strategists Zhaopeng Xing and Raymond Yeung wrote in a note. But by trading bonds and bringing securities brokers into the mix, the flow of funds to the capital market can go beyond traditional avenues, they said.

“Securities firms are less risk-averse in asset allocation than commercial banks,” the strategists wrote. “They will be able to serve China’s emerging sectors, while commercial banks have a strong preference for the large state enterprises and real estate collateral.”

China investors have been abuzz with the possibility of the PBOC trading bonds in the secondary market after comments from President Xi Jinping published in March signaled such a move would enrich the toolbox of monetary policies. Central bank and finance ministry officials voiced support in the past month, though the PBOC specifically pushed back at equating such a move to quantitative easing.

The traditional approach of China boosting the cash available for banks to lend is less effective at finding its way to capital markets, as suggested by stock routs and disrupted IPOs, ANZ said. That’s even as China’s so-called money multiplier, the ratio between the broad measure of money in use and base money created by the PBOC, remains elevated at around 8 times.

Allowing securities brokers to participate in open-market operations will serve this purpose, the strategists wrote.

ANZ expects the PBOC to add more securities firms to its OMO primary dealers list, which may be updated later this month. The dealer group released a year ago consists of 51 institutions, including 48 banks, two brokerages and one state-backed entity - China Bond Insurance Co. Ltd.

Unlike peers including the Federal Reserve or the Bank of Japan, the PBOC holds only a tiny proportion of government bonds and its regular liquidity management tools, such the medium-term lending facility or daily reverse repurchase transactions, all involve trading with banks.

“Unlike commercial banks, the capital market can allocate monetary resources to emerging industries more effectively,” the strategists wrote.

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