China: Saying yes to more monetary easing
China’s central bank’s increasingly dovish pivots suggest that achieving the official growth aim of “around 5%” may be more akin to a minimum target, as officials appear to show increasing willingness to support the economy.
In view of the surprise PBOC cut to the 7-day reverse repo rate, we now anticipate more rate cuts in Q2 and Q3. This will bring total monetary easing to the same extent as the cycle in 2022, but less expansionary than that seen in 2020. A prolonged easing cycle leading to a sustained credit upswing is unlikely to be PBOC’s intended outcome.
What you will learn:
- Recent reports hinting at forthcoming piecemeal support for the property sector and on policy banks’ relending programmes for industries are also congruent with our new policy assumptions. Improving China’s credit multiplier will necessarily require more efficient and productive allocation of resources.
- Rate cuts at this juncture might help assuage investors’ immediate concerns over the lack of policy responses to slowing growth momentum, but the confidence boost is unlikely to last in the context of a slow-burning property sector correction, still-weak income growth, and a deteriorating external demand outlook.
- Furthermore, unless credit demand and banks’ risk appetite rise sufficiently, the real economy boost from lower rates and increased credit supply are likely to be marginal, making our baseline forecast of a managed slowdown a more likely prospect.
Enabling North American Graphite Growth
This report explores the global graphite market, rationales for trade action on Chinese graphite, and the history of Section 301 tariffs on US imports of graphite anode material from China.Find Out More
Will Chinese Traveller Behaviour Change?Find Out More
Cross-Asset framework supports risk-on shift
We move to a modest overweight on risk assets this month as we have become more optimistic on the global cycle. Our forecast for US growth this year is now clearly above consensus, and we see the risk balance for our China growth forecast as tilted to the upside.Find Out More