China’s monetary policy could ease further in 2023, analysts say, after central bank cuts reserve ratio

Name: China’s Singles’ Day tempered by strict Covid rules and slowing economy
Uploaded: 2022-11-27T13:00:11.000Z
Duration: 2 min 7 s
Description: China’s Singles’ Day tempered by strict Covid rules and slowing economy

Need for healthy growth amid fears of a global recession rules out restrictive monetary policy for China, noted economist says

Latest central bank move to boost liquidity aimed at financial institutions seeking to buy local government bonds, says Shanghai professor

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A deserted commercial area in Beijing as Covid-19 restrictions are implemented. Photo: Bloomberg

Kandy Wong

Published: 9:00pm, 27 Nov 2022Updated: 9:07pm, 27 Nov 2022

Sustained downward economic pressures leave room for China to further loosen its monetary policy next year, Chinese analysts said.

Noted economist Lian Ping said the space for loosening would grow as the challenges posed by successive US interest rate hikes would be over in 2023. The US raised rates six times this year to curb domestic inflation, four of them in the range of 0.75 per cent.

“The global economy will continue to point south next year because Europe, Japan and some developing countries are approaching negative growth,” Lian, head of Zhixin Investment Research Institute, told an economic conference in Shanghai on the weekend. “This situation will affect China’s exports.”

Lian Ping says more aggressive fiscal support can be expected. Photo: Handout

The need for healthy growth in the key economic pillars – exports, property and consumption – meant a restrictive monetary policy for China could be ruled out, and which also pointed to more aggressive fiscal support, said Lian, who chaired the conference.

Expansionary monetary policy refers to boosting money supply or lowering short-term interest rates with an aim to promote consumer and business spending through increased liquidity.

China’s central bank last Friday cut the amount of cash that banks must hold in reserve for the second time this year to shore up growth.

This came as restrictive Covid-19 containment measures and a property market slump continued to dampen consumer sentiment and weigh on the world’s No 2 economy.

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China’s Singles’ Day tempered by strict Covid rules and slowing economy