The government of Chinese President Xi Jinping has reportedly been exerting pressure to boost the country’s economy as Beijing is mulling a broad package of stimulus measures, Bloomberg reported citing people familiar with the matter.
Earlier this month, Bloomberg quoted sources to report that after existing policies failed to sustain a rebound in the property market, China aimed at introducing a set of measures to support the ailing sector.
While speaking on the condition of anonymity, the sources told the outlet that the measures are designed to support areas such as real estate and domestic demand. They also mentioned that interest rate reductions, supporting the real estate market, and more key areas are under consideration.
As quoted, one person said that regulators are seeking to lower costs on outstanding residential mortgages and boost re-lending through the nation’s policy banks. They want to ensure homes are delivered.
This comes as the news agency Reuters reported that China’s central bank cut short-term borrowing costs on Tuesday to help restore confidence. The move signalled possible easing for longer-term rates.
The plan is not final yet, and the State Council may discuss the policies as soon as this Friday. They might make some amends in the policies during the discussion.
According to Larry Hu, who is the head of China economics at Macquarie Group Ltd, the rate cut signals Beijing’s stance is turning more supportive.
As quoted by Bloomberg, Hu said that “policy is the only game changer” in the face of weak consumer and business confidence in the economy.
Hu added, “The rate cut today sent a clear signal that policy would turn more supportive in the coming months, a significant shift from the tapering in stimulus since April.”
China’s new loans in May miss forecasts
Reuters mentioned in its report that China’s new bank loans picked up in May from the previous month, amid an economy-friendy policy being accommodated by the central bank. However, the signs of slowing momentum have raised expectations that more stimulus may be needed to sustain the recovery.
Analysts have said that the weaker-than-expected credit data could strengthen the case for policymakers to roll out more support steps, including a cut in the benchmark lending rate this month.
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New bank lending rose to $190.18 billion in May, data from the People’s Bank of China (PBOC) showed on Tuesday. The figures are up from April but missed analysts’ estimates.
According to the economists polled by Reuters, it was expected that new yuan loans would jump to 1.6 trillion yuan last month, versus 718.8 billion yuan in April and against 1.89 trillion yuan a year earlier.
As quoted by the news agency, Zhiwei Zhang, chief economist at Pinpoint Asset Management, said in a note: “The credit growth is weak, which is not surprising as other economic indicators such as PMI and exports also sent consistent signals.”
“This explains why the PBOC cut the reverse repo rate this morning. It is a small step in the right direction. I expect more policy actions to follow in coming weeks,” Zhang added.
(With inputs from agencies)
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