China’s Central Bank, the People’s Bank of China (PBOC), is said to be planning to inject around 200 billion yuan, or $32.7 billion, into the nation’s banking system as it steps up stimulus efforts to support slowing economic growth, The Wall Street Journal (WSJ) and Bloomberg reported on Friday.
According to the WSJ, the PBOC will offer such funds to around 20 large national and regional banks in China.
According to Bloomberg, the PBOC will provide funds to joint-stock banks in an effort to prepare them for their end of the year liquidity needs, citing a government official familiar with the matter, whom asked not to be identified due to the fact the announcement had not yet been made official.
The latest PBOC move comes after last month’s injection of 500 billion yuan ($81 billion) of liquidity into the nation’s five largest state-owned banks.
“The economy is decelerating, and I believe it is high time to do more easing to stop the downward trend,” Shen Jian-guang, the chief Asia economist at Mizuho Securities Asia told Bloomberg via e-mail.
Last weekend, Chinese state-backed researchers Li Daokui and Chen Dongqi warned of slowing growth amid property weakness.
Chen Dongqi, the Deputy Director of the research arm of the National Development and Reform Commission (NDRC) said that China’s growth could slow to 7.1% in 2015, from an estimated 7.4% in 2014, according to Bloomberg.
In the event that China’s economic growth should slow to a range of 6.5% to 6.8%, the Chinese government could still opt for monetary policy tools including “benchmark interest rates and required reserve ratio,” Chen said, speaking at a forum in Beijing last Sunday, according to Bloomberg.
Li Daokui, a former adviser at the PBOC, and now the head of the Economic Research Center at the Tsinghua University, cut China’s gross domestic product (GDP) forecasts last Sunday to 7.4% in 2014, from a previous estimate of 7.6%, and estimated that growth would slow further to 7.3% in 2015.
“The property industry, which has been a traditional driving force for the Chinese economy, has lost power and is expected to remain weak,” Li said.
Last weekend at the IMF and World Bank meetings in Washington, Ma Jun, the Chief Economist at the PBOC said that China faces a “very low” risk of a hard landing and that he doesn’t see any reason for large-scale fiscal or monetary stimulus “in the foreseeable future.”
China’s property market, which accounts for 20% of China’s total investment, is the main downside risk to the Chinese economy, Ma Jun told a panel on the sidelines of the IMF and World Bank fall meetings held in Washington last weekend.
“Although we worry about some downside risk like the real-estate slowing down and so on, there are also growth engines, including the service sector in general, the Internet in particular … and healthcare is rising very rapidly,” Ma said.
The slowdown in China’s real estate is putting downward pressure on the nation’s economy and that some further deceleration in the sector could be seen due to weak public sales, Ma said.
Last week, China’s Vice Finance Minister Zhu Guangyao said that China is closely watching its real estate market, however he did not see the need for any big stimulus for the sector or the rest of the economy, adding that the current economic situation in China, including its real estate market, was “still stable.”
Last Weekend, Chinese Premier Li Keqiang reiterated that China is still expecting economic growth around 7.5% in 2014 during a speech to businessmen and politicians in Germany.
China could exceed or miss its growth target, however the nation doesn’t “face a hard landing as some say,” Li said.
“Stamina and perseverance” are just as important as speed in the economic policy mix, which underlies why the Chinese government has avoided further economic stimulus measures including using monetary policy to help meet the nation’s growth target, he said.
On October 8, Premier Li announced that China would launch “major projects” before the end of the year in water resources, environmental protection, and information networks, an Xinhua report stated, however no further details were provided.
Sources: Bloomberg, WSJ, Reuters, Xinhua
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