According to analysts at Standard Chartered, China’s growth remains respectable, despite the current slowdown, but what worries the market is that things could get much worse in the coming quarters.
Key Quotes
“Below, we outline seven available policy options to stimulate China’s economy in the face of the slowdown.
1. Accelerate infrastructure investment. Local governments are accelerating spending, and banks have been told to lend to local government investment vehicles (LGIVs) to complete ongoing projects. The equity capital requirement ratio for investment projects could be cut further to reduce funding constraints.
2. Adopt proactive fiscal policy via the new individual income tax law, and increased tax rebates for exporters. Providing fiscal subsidies for consumer-goods sales and cutting the value-added tax (VAT) or companies’ mandatory social security contributions could also be considered.
3. Maintain sufficient interbank liquidity and promote financing to government-preferred projects via differentiated required reserve ratio (RRR) cuts, window guidance, and the central bank re-lending facility.
4. Revive total social financing (TSF) growth, possibly by extending the transition period for compliance with new asset management regulations.
5. Achieve measured CNY depreciation driven by market forces.
6. Selectively ease property-market policies.
7. Cut PBoC benchmark lending and savings rates (only in case of an unexpected shock to the economy).”