Visitors line up in front of the Huawei flagship store before it opens on Nanjing East Road, one of the city's main commercial and tourist area, in Shanghai, China, on Saturday, Sept. 30, 2023. China's economy showed signs of a stronger recovery in September, according to a firm analyzing the global economy using satellite data. Photographer: Qilai Shen/Bloomberg
Beijing: The People’s Bank of China, the nation’s central bank, has assured the market that it would continue to beef up support for economic recovery instead of paring down stimulus amid the recent uptick in recovery momentum.
Experts said that credit policies are likely to further ease as new structural tools may be launched in the fourth quarter to consolidate the nascent recovery in the property market, while the central bank may prudently cut the reserve requirement ratio (RRR) and interest rates if needed.
The RRR refers to the proportion of money that lenders must keep as reserves.
The central bank said in a statement last Wednesday that it would continuously support the real economy and strengthen policy adjustments as the nation’s economic recovery is improving but faces a harsher external environment.
“Currently, the external environment is becoming more complex and severe, with a slowdown in the world economy as well as international trade and investment, still high inflation and interest rates in developed countries that are expected to remain elevated,” the statement said, following the third-quarter meeting of the central bank’s monetary policy committee.
While the domestic economy continues to recover and improve with increasing momentum, it faces challenges such as insufficient demand, the statement said.
“We need to provide continuous support, ride the uptick in economic momentum, intensify the strength of macroeconomic policy adjustments, ensure the precise and effective implementation of prudent monetary policy and make good use of counter-cyclical and cross-cyclical adjustments.”
The phrase “counter-cyclical adjustments” was newly added compared with the statement from the second-quarter meeting in June, which experts said signalled the central bank’s proactive stance of continuing policy support for the country’s improving recovery momentum, with retail sales accelerating in August while industrial profits improved.
“The statement shows that strengthening policy adjustments and promoting a sustained improvement in economic conditions are still the main policy tone,” said Lou Feipeng, a researcher at the Postal Savings Bank of China.
Compared with the statement from the second-quarter meeting, the statement also added a reference to intensifying the implementation of the monetary policy tools that have been introduced, and encouraging a rebound in price levels.
Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said he particularly expects the central bank to promote a relatively quick reduction in the interest rates of new mortgages, while new targeted monetary tools may be launched to support the real estate sector.
The central bank’s statement vowed to lower downpayment thresholds as well as the mortgage rates of second homes and reduce interest rates for existing first-home mortgages.
It also gave hints about its future aggregate policy steps by saying that it would keep the level of liquidity reasonably ample, give full play to the guiding role of the central bank’s policy interest rate and bring down the cost of financing for enterprises and households while keeping it generally stable.“We think there remains the scope for cutting interest rates and the reserve requirement ratio in the remainder of the year,” said Tao Chuan, chief macroeconomic analyst with Shanghai-listed Soochow Securities.The central bank may cut the RRR in November or December as a forward-looking move to accommodate fast credit expansion in January, while a small interest rate cut may be implemented, Tao said. — China Daily /ANN
