As China's leaders meet, economy sends distress signal
July 15 (Reuters) -The writing's on the wall that the Chinese economy needs help, specifically in the consumption and propertysegments. As the Third Plenum commences, there's cautious optimism that policymakers will lay a path for more stimulus measures.
Data releasedMonday showed Q2 GDP grew significantly less than expected at 4.7% annually versus forecasts for 5.1%. Although June industrial output and exports last week beat expectations, retail sales missed badly and new home prices continued to slide.
The stage is set for China to ease monetary policy, but Beijing is likely still wrestling with the conundrum that it would weaken the yuan and worsen capital flight, undermining any stimulus-driven boost in investor sentiment.
The People's Bank of China kept the one-year medium-term lending facility rate unchanged as expected on Monday, while withdrawing some liquidity. In another strong hint that easing can wait, the central bank againwarned bond buyers against expectations of ever-lower rates.
Yet, other policy changes could be announced after the Plenum.Analysts anticipate tweaks to consumption taxes, and perhaps residential quota permits that might spur more spending and helpalleviate the property slump.
The effect of relaxing home-buying curbs appears to be evaporating, even in top-tier cities, suggesting initial signsthat China will reach its 2024 GDP goal of around 5% could prove to be a mirage in the absence of significant stimulus.
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Ewen Chew is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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