China’s Central Bank Signals Easing as Economic Growth Slows

  • by THO
  • 7 days ago
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(Bloomberg) — China’s central bank signaled possible easing measures to aid the economy’s recovery as growth weakens.

In its latest quarterly monetary policy report published Friday, the People’s Bank of China removed a few key phrases cited in previous reports, including sticking with “normal monetary policy.” That suggests a shift in stance toward more supportive monetary policy, according to economists at Citigroup Inc (NYSE:)., Nomura Holdings (NYSE:) Inc. and Goldman Sachs Group Inc (NYSE:).  

The report also dropped the phrase to “control the valve on money supply,” which suggests a step-up of monetary easing, according to Macquarie Group (OTC:) Ltd.’s Larry Hu.

Any easing steps would likely be targeted toward small businesses and green finance, according to economists, similar to measures the PBOC has already taken in recent weeks, including 200 billion yuan ($31 billion) of financing for coal projects announced last week. 

Goldman Sachs’ Hui Shan and colleagues said policy interest rates would likely remain unchanged, while Nomura’s Lu Ting said the chance of a reduction in the reserve requirement ratio will rise in coming months.

“We expect Beijing to soon significantly step up its monetary easing and fiscal stimulus to counteract the increasing downward pressure,” Lu said.  

The PBOC’s quarterly report came on the same day that Premier Li Keqiang told a seminar China still faces “many challenges” in keeping the economy stable, although this year’s goals will likely be achieved. 

Liu Shijin, who sits on the central bank’s monetary policy committee, said in an online forum Sunday that the economy could enter a period of “quasi-stagflation,” which needs close attention if it happens.

©2021 Bloomberg L.P.

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