China is ramping up stimulus to boost market confidence — but is it enough?
BEIJING — Expectations for more support from China to boost its economy and stock markets are rising— especially after the central bank's easing announcements on Wednesday.
Starting Feb. 5, thePeople's Bank of China will allow banks to hold smaller cash reserves, central bank governor Pan Gongsheng said at a press conference, his first in the role.
Cutting the reserve requirement ratio (RRR) by 50 basis points is set to release 1 trillion yuan ($139.8 billion) in long-term capital, the central bank said.
«The latest [PBOC] announcements may be interpreted as the beginning of a policy pivot from previous reactive and piecemeal measures by investors, and they will continue to look for further signs and acts of policy support,» Tao Wang, head of Asia economics and chief China economist at UBS Investment Bank, said in a note Thursday.
Beijing has been reluctant to embark on massive stimulus, which would also widen the yield gap between China and the U.S. given the Federal Reserve's tighter stance on monetary policy. The PBOC kept a benchmark lending rate unchanged again on Monday, holding pat on loan prime rates.
The magnitude of the central bank's announcement Wednesday on the RRR cut exceeded Nomura's forecast for a 25 basis point reduction, said the firm's chief China economist, Ting Lu.
«We think this larger-than-expected RRR cut is a further sign that the PBoC and top policymakers have become increasingly concerned about the ongoing economic dip, which we have been flagging since mid-October last year, and the latest equity market performance,» he said in a note Thursday.
«More interestingly, the policy decision was revealed in a less-usual fashion, as the PBoC Governor made the announcement personally during a Q&A
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