Will China's latest economic stimulus jumpstart its struggling economy?
China opted to roll out financial stimuli last week to shore up its failing economy.
The measures include:
1. Cutting the banks' reserve requirement ratio by 50bps which will free up about RMB 1 trillion ($142.44/t billion)
2. Cutting the 7-day open market operation reverse repo rate by 20bps lowering to 1.5%
3. Approximately 50bps decrease in existing mortgage loans
4. Medium-term Lending Facility (MTF) is likely to be cut by 0.3 percentage points
5. Minimum down-payment ratio for buyers of the second house from 25% to 15%
6. Loan Prime Rates (LPR) and deposit rates cut down to 0.25 percentage points
7. The Central bank covering 100% (compared to 60% before) of loans for local governments that buy unsold homes with cheap funding
8. The Central bank is considering to inject RMB 1 trillion ($142.44/t billion) into China's biggest six state banks to increase their capacity
The stimulus package seems to be a great tool to shore up the China's flagging economy, yet some economists don't see the measures to be adequate in the country's current situation.
"Although the numbers sound big and the efforts seem wide-reaching, this stimulus announcement alone may not be enough to bring the entire Chinese economy out of the doldrums," Business Insider citing Liz Young Thomas, Head of Investment Strategy at SoFi.
“Today’s announcement is not a game changer,” The Banker quoted Yingrui Wang, China economist at AXA Investment Managers.
"The move probably comes a bit too late, but it is better late than never," Reuters commented Gary Ng, a senior economist at Natixis.
Got an opinion? Let’s hear it!
Sources:
1. https://www.thebanker.com/China-s-stimulus-package-not-enoug...
