China Unleashes Stimulus Blitz To Hit Annual Growth Goal

(September 24, 2024 - Bloomberg News)

Beijing | China’s central bank unleashed a blitz of policy support for the economy, as policymakers made their broadest swing to hit this year’s annual growth target of about 5 per cent.

People’s Bank of China governor Pan Gongsheng announced a cut to the amount of money banks must hold in reserve, taking it to the lowest level since at least 2020, and cut a key policy rate at a rare briefing in Beijing on Tuesday.

People’s Bank of China governor Pan Gongsheng made the latest announcement at his first high-profile press conference since March Bloomberg

That marked the first time both measures were slashed on the same day in at least the past decade, underscoring the urgency of his task.

“It is too far from being a bazooka. We are not sure how much the mortgage rate cut will induce a property recovery.”

Raymond Yeung, ANZ chief greater China economist.

The central bank chief also unveiled a package to shore up the nation’s beleaguered property market, including lowering borrowing costs on as much as $US5.3 trillion ($7.8 trillion) in mortgages and easing rules for second-home purchases. China will allow funds and brokers to tap PBoC funds to buy stocks, he added.

Financial markets gave the package a cautious thumbs-up. The CSI 300 Index rose for a fifth straight day, gaining 0.5 per cent, with around 200 of the companies in the gauge climbing on the day.

Commodities markets eked out small gains and the yuan was little changed against the dollar. China’s 10-year bond yield fell as low as 2 per cent for the first time on record.

Much-needed boost

While economists agreed Mr Pan’s policy barrage beat expectations, many questioned whether they could address issues dogging the world’s No. 2 economy, including weak consumer demand that has spurred the nation’s longest deflationary streak since 1999.

“It’s hard to say what silver bullet can help resolve everything,” said Ken Wong, Asian equity portfolio specialist at Eastspring Investments Hong Kong.

“While it’s good to have monetary easing measures that are accommodative, more needs to be done in order to help solidify fourth quarter growth.”

Eric Zhu, China economist at Bloomberg Economics, added: “At a minimum, this will give a much-needed boost to sentiment. Our baseline forecast has been for growth to come in at 4.7 per cent this year.

“This powerful package of monetary stimulus suggests growth could approach the 5 per cent target.