China’s Central Bank Hints Easing as Economic Risks Climb

china's central bank

On Monday, the People’s Bank of China (PBOC) signalled monetary easing measures to aid its slowed economic growth brought by the property slump.

Last Friday, the Chinese central bank removed several phrases on policy restraint in its latest quarterly report. 

In line with this, economists mentioned that the move could hint at an addition of a stimulus.

Moreover, the report withdrew previous phrases to “control the valve on money supply” and vowed not to “flood the economy with stimulus”. 

Correspondingly, this also suggested a shift in stance toward more credit support in the coming months. 

Subsequently, on Sunday, the PBOC retained its monetary policy at 3.85%, mirroring a more dovish outlook that follows growing concerns about economic recovery.

Accordingly, the world’s second-largest economy significantly slowed in the last several months.

This is due to the persisting regulatory crackdown on the property sector, soaring power crunch at factories and lackluster consumer spending.

Consequently, experts said that they widely anticipate that Beijing will soon step up its monetary easing and fiscal stimulus. 

At the same time, they highlighted the need to counteract the increasing downward pressure. 

Moreover, economists explained that expanding the money supply would positively stimulate spending in China’s economy.

China Sees Stagflation Risks

Recently, Chinese politicians flagged the rising concerns towards the economic recovery. 

For instance, Premier Li Keqiang mentioned that the government struggles with “many challenges” to keep the country stable. 

According to the analysts’ forecast, China’s growth could weaken to below 5.00% next year. 

Consequently, this would test the ability of the authorities to cut the economy’s reliance on the highly-leveraged property sector. 

In line with this, the PBOC noted that the economic recovery holds restrictions from temporary, structural and cyclical factors. 

Meanwhile, it kept its strict stance on the property market, contributing about a quarter of China’s economy.

Furthermore, it reiterated that it would not use the property market to stimulate growth. It also noted that risks in the industry are still controllable. 

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