{"id":140785,"date":"2024-09-24T05:24:05","date_gmt":"2024-09-24T05:24:05","guid":{"rendered":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/09\/24\/china-unleashes-stimulus-blitz-to-boost-ailing-economy-times-of-india\/"},"modified":"2024-09-24T05:24:05","modified_gmt":"2024-09-24T05:24:05","slug":"china-unleashes-stimulus-blitz-to-boost-ailing-economy-times-of-india","status":"publish","type":"post","link":"https:\/\/news.talkwithrattan.com\/index.php\/2024\/09\/24\/china-unleashes-stimulus-blitz-to-boost-ailing-economy-times-of-india\/","title":{"rendered":"China unleashes stimulus blitz to boost ailing economy – Times of India"},"content":{"rendered":"
\"China<\/div>\n
China\u2019s central bank unleashed an unprecedented blitz of policy support for the economy, as authorities made their boldest swing so far to hit this year\u2019s annual growth target of about 5%, after a flurry of Wall Street banks downgraded their forecasts.
People\u2019s Bank of China governor Pan Gongsheng cut the amount of money banks must hold in reserve to the lowest level since at least 2020, and reduced a key policy rate at a rare briefing in Beijing on Tuesday.That marked the first time both measures were slashed on the same day in the past decade, underscoring the urgency of his task.
The central bank chief also unveiled a package to shore up the nation\u2019s troubled property sector, including lowering borrowing costs on as much as $5.3 trillion in mortgages and easing rules for second-home purchases.
For the nation\u2019s beleaguered equity market, China will unlock at least 800 billion yuan ($113 billion) of liquidity support, Pan added, noting officials were studying setting up a stock stabilization fund.
Financial markets gave the package a thumbs-up. The CSI 300 Index rose for a fifth straight day, gaining as much as 1.3%, with over 200 of the companies in the gauge climbing. Commodities markets eked out small gains and the yuan was little changed against the dollar. Government bonds flipped to a loss on the stock gains. China\u2019s 10-year bond yields rose 2 basis points to 2.05%, erasing an earlier decline to a record low.
But while Pan\u2019s policy barrage beat expectations, and likely put the growth target back in sight, analysts questioned whether it was enough to break China\u2019s deflationary spiral and entrenched real estate crisis.
\u201cIt\u2019s hard to say what silver bullet can help resolve everything,\u201d said Ken Wong, Asian equity portfolio specialist at Eastspring Investments Hong Kong Ltd. \u201cWhile it\u2019s good to have monetary easing measures that are accommodative, more needs to be done in order to help solidify fourth quarter growth.\u201d<\/p>\n
\n

This will be a day to remember for China\u2019s monetary policy. The People\u2019s Bank of China unleashed a barrage of measures, from cuts to interest rates and reserve requirements to making central bank funding available for investors to purchase stocks. Each individual step on its own is significant. Delivering them all at once is highly unusual and speaks to the urgency felt in Beijing to head off deflationary risks and get growth on track for this year\u2019s 5% target … We estimate the boost to 2024 growth to be around 0.2 ppt, with most of the impact falling in 2025.<\/p>\n

Chang Shu, China economist<\/p>\n<\/div>\n

Chang Shu, China economist
President Xi Jinping<\/a>\u2019s government has been trying to give the economy a kick without resorting to bazooka stimulus packages of past years, but so far piecemeal efforts have failed to arrest the slowdown. That deterioration \u2014 growth has slowed to its worst pace in five quarters \u2014 is testing the leadership\u2019s tolerance for missing a high-profile target for the second time in three years.
\u201cThe purpose of today\u2019s briefing is to inject confidence into the market, judging by the fact that the authorities revealed measures in one go,\u201d said Larry Hu, head of China economics at Macquarie Group Ltd. \u201cThe stimulus push will still need coordination from other policies \u2014 particularly follow-up policies from the fiscal side.\u201d
The Federal Reserve\u2019s bigger-than-expected half-percentage point slash has given central banks across Asia more room to move. But making money cheaper won\u2019t lift the economy if Chinese consumers don\u2019t want to spend because layoffs are looming amid sliding corporate profits and property prices are still falling. New home prices clocked their biggest decline last month from the previous period since 2014.
China’s Government Spending Drops | Revenue is down because land sales fell, so spending is also down from last year
Pan\u2019s decisive display of ramped up monetary policy now sets the stage for the Finance Ministry to unveil its own bid to defend the growth target. A plunge in revenue from land sales has held back fiscal spending this year, leaving indebted local governments with little bandwidth to invest in growth-boosting projects.
\u201cIt is too far from being a bazooka,\u201d ANZ chief greater China economist Raymond Yeung said of the package. \u201cWe are not sure how much the mortgage rate cut will induce a property recovery.\u201d
China\u2019s property rescue package unveiled in May has failed to turn around a years-long real estate slump. Only 29 cities out of 200 urged to participate are heeding Beijing\u2019s call to help absorb an excess of housing.
Details of Pan\u2019s package:<\/p>\n

\n
    \n
  • The seven-day reverse repurchase rate will be lowered to 1.5% from 1.7%<\/li>\n
  • RRR lowered by 0.5 percentage points, unleashing 1 trillion yuan ($142 billion) in liquidity<\/li>\n
  • MLF expected to be cut by 0.3 percentage points<\/li>\n
  • Cut the minimum down-payment ratio to 15% for second-home buyers, from 25%<\/li>\n
  • China may also cut the RRR further this year by another 0.25 to 0.5 percentage points<\/li>\n
  • RRR cut won\u2019t apply to small, rural banks<\/li>\n
  • LPR and deposit rates will fall by 0.2 to 0.25 percentage points<\/li>\n
  • The PBOC to cover 100% of loans in program for local governments to buy unsold homes with cheap funding, up from 60%<\/li>\n<\/ul>\n<\/div>\n

    The central bank governor unveiled his big policy shift at his first high-profile press conference since March, appearing alongside securities regulator chief Wu Qing, and Li Yunze, head of the National Financial Regulatory Administration. The trio used their collective public debut to roll out steps to salvage investor sentiment and stem a selloff in the stock market.
    That included new financial tools to expand liquidity for the stock market, which would help listed companies and major shareholders buy back shares and raise holdings.
    The PBOC chief has displayed a more transparent approach to policy this year, in a bid to stabilize sentiment. Pan used a similar briefing in January to announce a RRR cut two weeks ahead of time, as authorities tried to halt a $6 trillion stock-market rout.
    \u201cMonetary policy easing came in bolder than expected,\u201d said Becky Liu, head of China macro strategy at Standard Chartered Plc. \u201cWe see room for bolder easing ahead in the coming quarters, following the Fed\u2019s outsized rate cuts.\u201d <\/div>\n