Pan Gongsheng, vice governor of the People’s Bank of China (PBOC) stated that China will maintain prudent monetary policy. He also told a news conference that the space for monetary policy is still relatively big.
China’s economy is losing their steam. Many small firms are struggling have stoked market expectations of policy support sooner rather than later. In mid Jully, the PBOC delivered a cut to banks’ reserve requirement ratio (RRR). In the same event, Sun Guofeng, head of the monetary policy department at the PBOC, spoke that there is no big shortfall of base money, and liquidity supply. In the upcoming months as per him, the demand will remain balanced.
Nomura wrote in a research note that with a most likely worsening slowdown in coming months, they believe that the PBOC is unlikely to hold a hawkish stance. But still, based on the tone and messages from the press conference, they are lowering the probability of a targeted RRR cut in September-October to 50% from 70% previously. Also, Nomura added that the PBOC could opt for more targeted tools, so that they can support groups such as SMEs instead. Chinese exports unexpectedly grew at a faster pace in August, as per the custom data. This credit goes to the solid global demand, that is helping to take some of the pressure off the world’s No.2 economy.
