China Seen Taking Steps to Aid Growth After Credit Plunge 

China’s plunge in credit expansion last month and unexpected slowdown in investment spending flashed warnings on growth that investors and economists bet will spur policy makers to expand stimulus.

Barclays is forecasting two second-half interest-rate cuts, while Australia & New Zealand Banking Group Ltd. said a reduction in banks’ reserve requirements is imminent.

A property slump and dangers from rising bad loans are making it tougher for Premier Li Keqiang to sustain the fastest growth in the Group of 20 nations. Any stimulus would build on measures this year to expedite railway spending, free up money for loans for small businesses and channel funds toward building low-income housing.

“It is important for both monetary and fiscal policy easing to continue in the coming months,” Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd. in Hong Kong, said in an e-mail.

Tools include programs such as pledged supplementary lending that can direct credit to the economy, cuts in reserve requirements or interest rates, and fiscal spending on railways and affordable housing, Shen said.

Other pressures on growth mean the government and the central bank “are unwilling to allow a full credit unwind now,” George Magnus, a senior independent economic adviser to UBS AG in London, said in an e-mail. “The property market is in a structural fade, and the anti-corruption campaign is in full swing with no signs of an end.”

Chinese publications reported last month that the PBOC extended a 1 trillion yuan, three-year loan to a state development bank under the pledged supplementary lending program to support government-backed housing projects.

 

Source: Bloomberg

 

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