27 Mar 2014
What policy easing measures are likely in China? - Nomura
FXStreet (Bali) - Nomura Asia Economics Team looks at three different sets of policy easing measures likely to be implemented by the Chinese government in order to support slower growth.
Key Quotes
"First, on the monetary side, we believe the PBoC needs to send a stronger signal of policy easing. We believe a RRR cut of 50bp in Q2 and another 50bp cut in Q3 are likely. The probability of an interest rate cut is rising as well, although it is not yet part of our base case. Credit supply will also likely rise, as measured by bank loans and total social financing.
"Second, on the fiscal front, we believe fiscal spending will increase, so on a monthly basis the actual central government fiscal deficit may widen."
"Third, in the housing market, policies may loosen in de facto terms. The central government has decided to give local governments more freedom to choose housing policies that are appropriate for local circumstances. This will likely lead to policy easing, as local governments are under pressure to boost local housing markets. For instance, some property developers offer financing for buyers to cover part of their down payment, according to Chinese financial news.1 Such offer circumvents the down payment ratio requirement by the banks."
Key Quotes
"First, on the monetary side, we believe the PBoC needs to send a stronger signal of policy easing. We believe a RRR cut of 50bp in Q2 and another 50bp cut in Q3 are likely. The probability of an interest rate cut is rising as well, although it is not yet part of our base case. Credit supply will also likely rise, as measured by bank loans and total social financing.
"Second, on the fiscal front, we believe fiscal spending will increase, so on a monthly basis the actual central government fiscal deficit may widen."
"Third, in the housing market, policies may loosen in de facto terms. The central government has decided to give local governments more freedom to choose housing policies that are appropriate for local circumstances. This will likely lead to policy easing, as local governments are under pressure to boost local housing markets. For instance, some property developers offer financing for buyers to cover part of their down payment, according to Chinese financial news.1 Such offer circumvents the down payment ratio requirement by the banks."