According to J.P. Morgan Asset Management, the number of measures that have been taken by Chinese authorities to stimulate the slowing economy is apparently not enough for the second largest economy of the world to address the challenges that it is facing currently.
“I do think China’s economy warrants a little more aggressive easing than the government’s come through so far,” Hannah Anderson, global market strategist at J.P. Morgan Asset Management, said during an interview with the news channel CNBC.
The comments of Anderson was made partly in reference of the announcement of the central bank of this Asian economy – the People’s Bank of China — earlier this month of its reduction of the amount of reserve money that the banks are required to keep in custody by 1 percentage point. With the latest measure, the central bank has made five similar moves to stimulate the economy and increase liquidity in the market in the last one year.
In order to encourage giving out of more loans to smaller firms by the commercial banks in China, the central bank had launched a new tool called the targeted medium-term lending facility earlier in December last year. Other policy support, such as infrastructure spending and tax cuts would be initiated further to stimulate the economy, the Chinese government had said earlier.
These economic and fiscal measures were undertaken by China even as there was emergence of more signals about the slowdown in the economic growth of the country. The continued uncertainty and high tariffs because of the trade war with the United States is also putting additional pressure on China.
But Anderson noted that the slew of steps taken by the central bank so far is “not adding that much liquidity into the market in China,” while referring to the amount of funds that are available for spending and investment. “So, we should expect further easing ahead,” she added. She however did not specify the exact measures that the country should potentially undertake to stimulate its economy.
Some other economists and analysts also have similar views. China’s next possible “major step” is a possible lowering of its benchmark lending rates, said Mark Williams, chief Asia economist at research firm Capital Economics, in a note. “We suspect the next major step that is not broadly anticipated will be a cut to benchmark lending rates,” Williams wrote last week.
“For all that though, no one should be expecting a rapid improvement in the economy … Given the downward pressures the economy is facing, we’re expecting stimulus only to arrest the slowdown in growth, probably around the middle of the year, but not to drive a significant rebound,” he added.
(Adapted from CNBC.com)