Back to Basics for PBOC

The People’s Bank of China under new Governor Yi Gang is taking a more traditional approach to monetary policy. Conventional countercyclical tools such as cuts to the required reserve ratio (RRR) are back in vogue, rather than attempts to manage the structure of the economy. Monetary easing has begun, and we expect more RRR cuts to assist banks in boosting deposit levels, potentially as early as June, when liquidity conditions tighten seasonally. Regulatory tightening is still biting, slowing overall credit growth, and continued monetary easing should only be expected to stabilize activity growth much later this year.

Posted May 29, 2018
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