While China’s headline GDP data remained as stable as ever, virtually all other official indicators showed far more cyclicality, highlighting the importance of weakening credit growth. Inflationary pressure has eased, while other indicators of domestic demand appear softer as well. The PBOC’s recent RRR cut highlights Chinese authorities’ views of the necessity of a policy response to the cyclical slowdown, as well as the growing difficulties banks are facing in attracting deposits as older loans migrate back to banks’ balance sheets.
