Western depictions of the relative performance of the US Federal Reserve and the People’s Bank of China invariably present the former as sophisticated and proactive, while the latter is portrayed as reactive and bureaucratic. If you take a moment to examine these preconceptions, you can see how wrong they are.

The firepower of central banks is under intense scrutiny as countries look for ways to claw themselves out of recession induced by the spread of Covid-19. While the Fed has taken to loading its balance sheet with bonds and taking corporate credit risk for the first time, the PBoC has resisted traditional quantitative easing. 

With US equity markets soaring and credit spreads tightening materially, most of the plaudits have gone to the Fed. But when you take a more nuanced look, it becomes clear that the PBoC is successfully engineering a recovery without recourse to unconventional policy and the moral hazard that comes with it. It is also clear that chairman Yi Gang has more options at his disposal than his US counterpart, in the event that the crisis worsens.