BEIJING: China is likely to cut the amount cash lenders must hold as reserves by another 100 basis points this year and lean more on fiscal policy to support the economy's growth, which is likely to bottom out in the second quarter at 7.9 per cent year on year, a poll shows.
The central bank cut banks' reserve requirement ratio (RRR) to 20.0 per cent on Saturday from 20.5 per cent, effective May 18.
The consensus of the poll conducted today is for RRR to be cut to 19 per cent by the end of the year, an outcome that is unchanged from the last poll on the subject on April 19.
The People's Bank of China is expected to deliver the next cut in the RRR in the second quarter and another in the third quarter, according to the median forecast of 22 economists.
The cut announced on Saturday frees up an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy.
It came after data signalled that the economy continued to weaken from the first three months of the year, when 8.1 per cent growth marked the slowest quarter of expansion in three years.
The pace of expansion in industrial production slowed sharply in April and fixed asset investment - a key driver of the economy - hit its lowest level in nearly a decade, confounding economists who had been expecting signs of a rebound in the second quarter.
The poll forecast no change in benchmark interest rates this year, but only by a slight majority with 11 analysts out of 21 expecting the status quo compared to 13 out of 17 in the previous poll in April.
Expectations of a cut in benchmark interest rates are gaining steam as China's economy feels stiff headwinds from the global downturn while domestic inflation eases.
Annual consumer inflation dropped to 3.4 per cent in April from 3.6 per cent in March, but there is little room for cutting interest rates given one-year benchmark deposit rates stand at 3.5 per cent.
The poll also produced a consensus view that the government would step up fiscal efforts to support economic growth. Steps may include more government spending on infrastructures, cheap housing projects and tax cuts in some sectors.
Some economists expect Beijing to partially relax curbs on the property sector, such as easing bank lending for first-time home buyers and for property developers engaged in constructing affordable housing.
However, few expect stimulus spending modelled on the 4 trillion yuan ($635 billion) splurge unveiled during the 2008-09 global crisis, which buoyed growth but created piles of local government debt.
In the poll, economists expect the annual rate of economic growth to be 7.9 per cent between April and June, the first dip below 8 per cent since 2009, a level regarded by many investors as the minimum growth needed to ensure sufficient job creation.
Growth could rebound to 8.2 per cent in the third quarter and 8.5 per cent in the fourth quarter, the median forecasts show.
That could bring the full-year annual growth rate to 8.2 per cent in 2012, down from 8.4 per cent expected in the previous poll. The previous calls were for growth of 8.5 per cent in the third quarter, 8.7 per cent in the fourth quarter and 8.4 per cent for the full year.
indiatimes.com
The central bank cut banks' reserve requirement ratio (RRR) to 20.0 per cent on Saturday from 20.5 per cent, effective May 18.
The consensus of the poll conducted today is for RRR to be cut to 19 per cent by the end of the year, an outcome that is unchanged from the last poll on the subject on April 19.
The People's Bank of China is expected to deliver the next cut in the RRR in the second quarter and another in the third quarter, according to the median forecast of 22 economists.
The cut announced on Saturday frees up an estimated 400 billion yuan ($63.5 billion) for lending to head-off the risk of a sudden slowdown in the world's second-largest economy.
It came after data signalled that the economy continued to weaken from the first three months of the year, when 8.1 per cent growth marked the slowest quarter of expansion in three years.
The pace of expansion in industrial production slowed sharply in April and fixed asset investment - a key driver of the economy - hit its lowest level in nearly a decade, confounding economists who had been expecting signs of a rebound in the second quarter.
The poll forecast no change in benchmark interest rates this year, but only by a slight majority with 11 analysts out of 21 expecting the status quo compared to 13 out of 17 in the previous poll in April.
Expectations of a cut in benchmark interest rates are gaining steam as China's economy feels stiff headwinds from the global downturn while domestic inflation eases.
Annual consumer inflation dropped to 3.4 per cent in April from 3.6 per cent in March, but there is little room for cutting interest rates given one-year benchmark deposit rates stand at 3.5 per cent.
The poll also produced a consensus view that the government would step up fiscal efforts to support economic growth. Steps may include more government spending on infrastructures, cheap housing projects and tax cuts in some sectors.
Some economists expect Beijing to partially relax curbs on the property sector, such as easing bank lending for first-time home buyers and for property developers engaged in constructing affordable housing.
However, few expect stimulus spending modelled on the 4 trillion yuan ($635 billion) splurge unveiled during the 2008-09 global crisis, which buoyed growth but created piles of local government debt.
In the poll, economists expect the annual rate of economic growth to be 7.9 per cent between April and June, the first dip below 8 per cent since 2009, a level regarded by many investors as the minimum growth needed to ensure sufficient job creation.
Growth could rebound to 8.2 per cent in the third quarter and 8.5 per cent in the fourth quarter, the median forecasts show.
That could bring the full-year annual growth rate to 8.2 per cent in 2012, down from 8.4 per cent expected in the previous poll. The previous calls were for growth of 8.5 per cent in the third quarter, 8.7 per cent in the fourth quarter and 8.4 per cent for the full year.
indiatimes.com
No comments:
Post a Comment