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China unveiled a slew of stimulus measures on Tuesday aimed at boosting economic growth and stabilizing the property market, including cutting the amount of cash banks need to have on hand and other policy adjustments.
Several analysts have said the measures are significant and positive and reflect the Chinese government’s determination to stabilize economic growth.
According to a research report by the Chinese think tank CF40, the People’s Bank of China’s (PBOC) moves reflect a clear intention of stabilizing economic growth, the stock market and the real estate market.
Specifically, the CF40 expects overall interest rates to go down, noting that they are more effective in supporting economic stability compared to reserve requirement ratio reductions. The report said PBOC’s lowering of mortgage rates for existing mortgages could directly help improve household cash flow and stabilize outstanding household credit.
Meanwhile, Lynn Song, chief economist for greater China ING, told CNBC that the series of measures are a “step in the right direction”, especially as multiple measures have been announced together, rather than spacing out individual piecemeal measures to a more limited effect.
He said that he continues to believe that there is still room for further monetary policy easing in the months ahead as most global central banks are now on a rate-cut trajectory.
Eswar Prasad, an economics professor at Cornell University, told the Financial Times that this “quantitatively modest but symbolically significant” set of actions signals the government’s willingness to use macroeconomic stimulus to support faltering economic activity.
Most experts believe that the PBOC’s actions have exceeded expectations and will boost market confidence at the minimum in the short term.
(Cover via CFP)
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