China’s long-term focus still the same despite stimulus measures
Easing by China’s central bank will stabilise the economy for now, but the country is looking for a paradigm shift in its overall strategy
Having confounded expectations it would immediately follow a benchmark interest rate cut in the United States, China has now announced a whole bunch of measures in one go intended to have maximum effect in boosting a flagging economy.
They amount to the most significant stimulus package since the pandemic. But it remains to be seen whether it is enough on its own.
Beijing has been conservative in using stimulus so far. But recent weak economic data, falling property prices and declining government bond yields have added to the pressure.
The markets anticipated the new policy measures and they have been well received. Pan Gongsheng, governor of the People’s Bank of China, the country’s central bank, also hinted there could be more stimulus measures to come.
They are mainly designed to restore the confidence of investors and the middle class, dampened by falling asset valuations that have, in turn, led to weak domestic consumption.
Pan announced, among other measures, that the mortgage rate for existing housing and the reserve requirement ratio for commercial banks would both be cut by half a percentage point.
He said the interest rate reduction was expected to benefit 50 million households or 150 million people, reducing household interest expenses by about 150 billion yuan (US$21.3 billion) per year, which would boost consumption and investment.
