China’s central bank
will refrain from further benchmark interest-rate cuts and economic
growth will hold steady in the fourth quarter, according to economists
surveyed by Bloomberg News.
Growth in the final
three months will be 6.9 percent from a year earlier, according to the
median of analysts estimates in an Oct. 19-27 survey. That’s more
optimistic than the 6.8 percent projected for the quarter in an earlier
poll.
The People’s Bank of
China will make one more cut to banks’ required reserve ratio this year
but leave both the lending and deposit interest rates at current levels
through to 2017, according to the survey. Policy makers lowered the
benchmark rate last week for a sixth time in a year after third-quarter
growth came in at the weakest rate since 2009.
“The PBOC may cut the
RRR (required reserve ratio) one more time this year and increase
central bank lending to make monetary policy transmission more efficient
and reduce effective financing costs,” Bian Quanshui, a China economy
analyst at China International Capital Corp. in Beijing, wrote in a
note. “Lower real interest rates will help stabilize economic growth and
prices.”
The central bank said
late Friday it would cut benchmark interest rates, stepping up the
battle against deflationary pressures. Policy makers also reduced the
amount of deposits banks must hold as reserves, adding liquidity that’s
been drained by increasing capital outflows since August’s yuan
devaluation. A gauge of capital outflows compiled by Bloomberg surged to
a record $194.3 billion in September.
The rate cut came just
before this week’s gathering of China’s top leaders, who are gathering
in Beijing to formulate the 13th five-year plan while confronting an era
of sub-7 percent growth for the first time since Deng Xiaoping opened
the nation to the outside world in the late 1970s. The world’s
second-largest economy grew 7 percent in both of the first two quarters
of this year, in line with Premier Li Keqiang’s goal, before the
expansion slipped to 6.9 percent in the third quarter.
Some alternative
readings suggest the growth pace is even slower. Bloomberg Intelligence
economists Tom Orlik and Fielding Chen say "official numbers may be
upward biased during downturns."
UBS Group AG chief
China economist Wang Tao expects the PBOC will cut rates one more time
this year, probably in December, and again in early 2016 to bring the
lending rate to 3.85 percent and the one-year deposit rate to 1 percent.
“This would push real
deposit rate into negative territory,” as has often happened in the
past, Tao wrote in a report. That could “encourage consumption, support
asset prices and anchor inflation expectations.”
Forecasters expect
growth to decelerate to 6.5 percent in 2016 and to 6.3 percent the
following year, the survey showed, down from an anticipated 6.9 percent
for 2015.
“Policymakers are
serious about defending the 7 percent growth target this year,” Larry
Hu, head of China economics at Macquarie Securities Ltd. in Hong Kong,
said in a recent note. He expects the central bank to make one more RRR
cut this year while leaving the main rate unchanged.
Source: Bloomberg
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