China should prepare “more powerful” policy to support economy

Vastavam web: China should prepare “more powerful” policy measures, possibly including a large-scale stimulus package, to prevent its economy from stalling as trade frictions with the United States persist, a state-backed tabloid said in a commentary on Thursday. Over the weekend, the People’s Bank of China (PBOC) announced its fourth cut in banks’ reserve requirement ratios (RRRs) this year to further ease credit conditions and support businesses, including exporters hit by China’s intensifying trade war with the United States.

Chinese corporates are still working to lower their debt levels following Beijing’s 4 trillion yuan ($577 billion) stimulus package a decade ago. “Depending on the economic situation, it [China] should prepare more powerful monetary and fiscal policy tools, possibly including a large-scale stimulus package,” the commentary in Global Times said.

“Compared with the RRR level of 9.5 percent in 2007, there is still room for further reduction in the current ratios of 14.5 percent for large financial institutions and 12.5 percent for small and medium-sized lenders.” The views in the newspaper, which is run by the ruling Communist Party’s official People’s Daily, do not necessarily reflect Chinese government policy.