SHANGHAI : China is likely to accelerate fiscal spending and credit growth as its economic recovery slows, but investors are expecting any easing measures from Beijing to be finely targeted as the U.S. Federal Reserve prepares to taper its own stimulus.To view the graphic, click here: https://fingfx.thomsonreuters.com/gfx/mkt/movanndxmpa/20210827-lprmlfcgbshibor.png
"If some infrastructure projects have to rely on the issuance of local government bonds, then the government should have an intention to lower bond yields," said Iris Pang, Greater China economist at ING said. She expects a 50-basis-point RRR cut in the fourth quarter. The PBOC last cut RRR in July.To view the graphic, click here: https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnndjdpq/202108localgovissuance.
"We think the intention is to keep growth in the 5-6per cent range in 2022, with the government likely to attach greater importance to curbing downside risks than to boosting upside potential. Fiscal policy will likely do the heavy lifting from H2-2021, with monetary policy playing a supportive role," said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered.
Analysts expect ample liquidity conditions with a loosening bias throughout the year to offset rising bond supply and heavy maturities of medium-term lending facility loans. Those expectations have strengthened after China's Politburo, the ruling Communist Party's top decision-making body, called for "cross-cyclical" policy adjustments with an eye on longer-term stability and sustainability of macroeconomic policy.
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