China’s cen­tral bank to cut RRR in Jan 2019

PBC, wary of fur­ther slow­down, main­tains rea­son­able liq­uid­ity

Global Times US Edition - - BIZUPDATE - By Chen Qingqing

China’s cen­tral bank is likely to cut the re­serve re­quire­ment ra­tio (RRR) in Jan­uary 2019 amid con­tin­u­ing down­ward pres­sure, as a move to im­prove liq­uid­ity and sup­port the real econ­omy, ex­perts fore­casted on Mon­day.

The Peo­ple’s Bank of China (PBC) has been all-out to main­tain liq­uid­ity at a rea­son­ably abun­dant level via var­i­ous tools such as pledged sup­ple­men­tary lend­ing and a medium lend­ing fa­cil­ity, said Pan Xiang­dong, chief economist of New Era Se­cu­ri­ties. As the down­ward pres­sure builds up, the mon­e­tary pol­icy fo­cuses more on sta­bi­liz­ing the eco­nomic growth and tack­ling com­pa­nies’ fi­nanc­ing dif­fi­cul­ties. “In terms of quan­tity, the cen­tral bank will prob­a­bly move to cut the RRR, use re­lend­ing and re­dis­count quo­tas and other tools to in­ject liq­uid­ity,” he said.

“As the RRR cut will have sig­nif­i­cant im­pact on the mar­ket, it’s highly likely that the cen­tral bank will cut around 1 per­cent­age point in 2019,” Pan told the Global Times on Mon­day.

China’s GDP growth slowed to 6.5 per­cent year-on-year in the third quar­ter due to both in­ter­nal and ex­ter­nal pres­sure, com­pared with growth of 6.7 per­cent in the sec­ond quar­ter. Still, it re­mains on track to reach the an­nual growth tar­get of 6.5 per­cent in spite of grow­ing down­ward pres­sure.

Pan also pre­dicted that it is pos­si­ble that the PBC will cut the RRR be­fore the end of this year, which will lead banks to give loans to pri­vate com­pa­nies, mi­cro and small-sized en­ter­prises and in­no­va­tive firms.

“We’re now near­ing the bot­tom of ‘L-shaped’ growth, and the risks of delever­ag­ing and the im­pact of the Chi­naUS trade war are con­straints on fur­ther growth,” Lou Ji­wei, for­mer min­is­ter of fi­nance, told a fo­rum in Bei­jing on Sun­day.

The mon­e­tary pol­icy will re­main sta­ble and sound, but to deal with ris­ing un­cer­tain­ties, it is highly likely to keep a sta­ble and slightly loose mon­e­tary pol­icy, Liu Xuezhi, an economist at the Bank of Com­mu­ni­ca­tions, told the Global Times.

“How­ever, since the ma­jor task is tack­ling debt risks, the pol­icy will not be a full-blown eas­ing to in­ject a large amount of cash into the mar­ket,” he said.

The PBC cut the RRR by 100 ba­sis points start­ing from Oc­to­ber 15, un­leash­ing about 750 bil­lion yuan ($109.2 bil­lion) into the mar­ket, which is the fourth re­serve ra­tio cut since the be­gin­ning of this year.

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