Gina’s mining newsletter couldn’t wait to get its teeth into this one:
“Top leaders have changed their views,” said a senior economist at a government think-tank involved in internal policy discussions.
The economist, who declined to be named, said the People’s Bank of China had shifted its focus toward broad-based stimulus and were open to more rate cuts as well as a cut to the banking industry’s reserve requirement ratio (RRR), which effectively restricts the amount of capital available to fund loans.
…”Further interest rate cuts should be in the pipeline as we have entered into a rate-cut cycle and RRR cuts are also likely,” the think-tank’s economist said.
…”Employment still holds up now, but it will definitely be affected if growth slows further,” said Yin Zhongli, senior economist at the Chinese Academy of Social Sciences, a top government think-tank.
I expect we’ll see more rate cuts, too, timed to prevent any sustained resurgence in property and investment. The PBOC said exactly that Friday night, here’s the translation from Bloomie:
At present, China’s economy continues to grow within a reasonable range, showing positive changes in economic restructuring. But as reflected in the real economy, there’s a significant problem of “difficult financing, expensive financing.”
Since the State Council has carried out a series of policies in July, authorities have done a lot of work, and such problems have eased in some areas and sectors. Yet, facing downward economic pressure and a rising structural shift, and as companies face growing difficulties in running their businesses, the ability of some enterprises, especially small businesses, to bear financing costs has weakened.
The adjustment is an important step toward maintaining growth, promoting employment and improving people’s living standard by solving the issue of high financing costs for companies, especially small businesses. The key to this round of interest rate cuts is to use the benchmark rate to guide market rates lower and to reduce social financing costs in a targeted way. Using this cut, we want to gradually make rates fall back to a reasonable level and help relieve the outstanding problem of high costs for enterprises, thus creating a neutrally appropriate monetary environment for healthy economic development.
This interest rates adjustment is a neutral operation and does not indicate any shift in the direction of monetary policy. As China’s economy is operating in a stable range and inflation shows a general downward trend, China’s central bank needs to flexibly use the interest rates tool to fine-tune and keep the real interest rates at a reasonable level according to the basic situation of economic operation.
This is an inherent meaning of maintaining and improving the regular interest rate adjustment mechanism, and a requirement of increasing the pertinence and effectiveness of prudent monetary policy. Currently the international situation is complicated. Although our country’s economy is facing some downward trends, the economy is big in size, the market is huge, and there is vast space to make progress on new industrialization, informatization, urbanization and agriculture modernization, and our capability to resist risks is strong.
In general, our country’s macro economy maintains a medium-high growth rate, price inflation has dropped, the economic structure is ceaselessly upgrading and improving, and economic growth is shifting from production factor-and-investment-driven to innovation-driven. So there is no need to take strong measures to stimulate and the direction of prudent monetary policy will not change.
Who to believe!!!
