China's state planner drops call for monetary easing from statement

The National Reform and Development Commission removed a call for subsidies to help reduce inventories of unsold homes without any explanation for the change

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A woman walks past the headquarters of the People's Bank of China (PBOC), the central bank, in Beijing, June 21, 2013. REUTERS/Jason Lee/File Photo

BEIJING (Reuters) - A research office at China's top economic planner on Wednesday called for the central bank to cut interest rates and bank reserve requirements, but later removed the remarks in an updated statement posted on its website. The National Reform and Development Commission (NDRC) also removed a call for subsidies to help reduce inventories of unsold homes without any explanation for the change. The NDRC did not comment when contacted by phone. A faxed request for comment was not immediately answered. The NDRC, generally associated with China's economic conservatives, is responsible for regulating prices, guiding state investment and otherwise operating the most planned parts of the economy. It usually does not express public views on central bank policy.

The original statement included comments on monetary policy that said China needed "to find the appropriate time to further cut interest rates and bank reserve requirement ratios."
Investors have been closely watching China's bureaucracy for signs of policy dissent since May, when the People's Daily quoted an "authoritative person" warning of a financial crisis if the government relied too much on debt-fuelled stimulus to spur the economy. That caused markets to sell off briefly as investors worried the easing cycle was coming to a premature end. Data shows the cost of credit has gradually resumed rising in China this year, which some blame for diminished investment by the private sector. One government official said he saw the report as a way for the NDRC to exert pressure on the central bank.

"The NDRC is always in favour of cutting rates because it is charged with keeping growth steady, while the central bank is always emphasising deleveraging, so it is more inclined to cut reserve requirements than interest rates," said the official speaking on condition of anonymity. In the original statement on its website on Wednesday, the NDRC also said it would lower costs for companies, encourage private enterprises to raise capital by issuing bonds, and push cities to further cut oversupply in their housing markets in part by implementing subsidies. In a separate statement posted around the same time as the revised NDRC document was seen, the People's Bank of China (PBOC) reiterated that it will maintain a "prudent" monetary policy and fine-tune policy in a preemptive and timely way.
The bank has not adjusted interest rates since October 2015.

The NDRC statement came from a research unit of the agency, not its key policymakers. Although unusual, China's stocks, currency and money markets shrugged off the announcement.

"Every ministry has this kind of policy support unit – they can say anything ... This shows that the NDRC as a macroeconomic management department, they see that the economy faces downward pressure," said Zhou Hao, economist at Commerzbank in Singapore.

(Reporting by Sue-Lin Wong and Winni Zhou; Additional reporting by Shen Yan; Writing by Pete Sweeney; Editing by Sam Holmes and Kim Coghill)