China will support economic growth to avoid stagnation

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China will cut banks’ reserve requirement ratios (RRRs), taxes and fees, Premier Li Keqiang said on Friday, as China’s economy shows further signs of cooling.

Beijing will also intensify the “counter-cyclical adjustments” of macroeconomic policies and further cut taxes, Li said, largely reiterating previous political commitments.

The measures will also include targeted cuts in bank reserve ratios to support small and medium-sized private companies, Li said in a statement on the Chinese government’s website.

China has reduced its reserve requirements four times in 2018 to free up more funds for banks and analysts expect another three or four cuts this year starting in the current quarter.

Beijing will also intensify the “counter-cyclical adjustments” of macroeconomic policies and further cut taxes, Li said, largely reiterating previous political commitments.

Li made these comments during a meeting with the country’s banking and insurance officials after visiting Bank of China, China Industrial and Commercial Bank and China Construction Bank.

China reported that production activity declined in December for the first time in over two years, highlighting Beijing’s attempts to end the trade war with Washington and reduce the risk of a sharper economic slowdown in 2019.

New industrial orders, an important indicator of future economic activity, continued to ease, suggesting that conditions in the Chinese economy could worsen in the future, before rebounding and improving.

In addition to the numerous central bank support measures, the government has also increased infrastructure spending to boost demand and investment, but the moves will take some time to kick off.

The government claims that the 2018 economic growth will still reach the target of around 6.5% this year, slowing from 6.9% in 2017.

But analysts see a further deceleration this year, with growth cooling to a minimum of 6% even if a trade agreement with the United States is reached.

“The economy is weak and the stimuli must come quickly,” ING economists said in a statement earlier this week.

Source: CNBC

 

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