The People’s Bank of China and other authorities in China announced multiple stimulus measures on Tuesday, including:
People’s Bank of China to cut its benchmark interest ratePBOC to lower the amount of cash that banks need to hold in reserve (this would free up more yuan for lending)will cut the interest rate payable on existing mortgageswill lower down payments for second homessaid further easing is in the pipelinePBOC to offer 500 billion yuan in loans to funds, brokers and insurers to buy Chinese stocksPBOC to stump up another 300 billion yuan to finance share buybacks by listed companies
The Wall Street Journal (gated, but here is the link if you can access it) rounds up many economists and analysts who are underwhelmed, reasoning:
borrowing costs are already low, yet credit data suggests households and businesses aren’t that interested in borrowingconsumer confidence is near record low levels, reflecting anxiety over jobs in a weak economythe meltdown in property continues
For example, the Journal cite Capital Economics, who acknowledge the moves are heading the right way:
“but are not really enough to drive a turnaround in the economy.” need more aggressive fiscal supportweakening activity is hitting tax revenue and local governments are struggling to spend their borrowing quota on viable infrastructure projectscentral government needs to borrow and spend more to drive up growth and inflationlocal government needs more freedom to use their borrowing quotas to support consumption
This article was written by Eamonn Sheridan at www.forexlive.com.
