China Policy Watch-Beijing's 'shock and awe' may work
Sept 27 (Reuters) -Chinese policymakers are bringing out the big guns, after analysts suggestedTuesday's sweepingeconomic stimulus package stillfell short of the'bazooka' needed to reignite growth. Beijing's new tacticmight work.
The People's Bank of China, after implementing a telegraphed50 basis-point cut in banks' reserve ratio effectiveFriday, also executed the 20 bps lowering of the seven-day reverse repo rate. In possiblya final salvo before China's Oct 1-7holiday, the PBOC unexpectedly slashed the 14-day reverse repo rate by 20 bps, on the heels of Monday's10 bps cut.
Chinese stocks extended their gains, with the Shanghai Composite rising 1%and the Hang Seng leaping 2.7%. Equities are enjoying their best week in 16 years,while the yuan has onlyretreated slightly Fridayfollowing its rapid gains.
While economists have pointed out that lower borrowing costs and increasedliquidity won't address anaemiccredit demand, and the effect of capital market-boostingmeasures might be fleeting, some are changing their tune with this week'sonslaught of stimulus announcementsand a clear paradigm shift by China's leadership.
Following the Politburo's pledgeto essentially spend as much as needed to hit its 2024GDP growth target, Reuters reported thatthe government intends to issue $284 billion in sovereign debt this year to revive the economy.
AndBeijing isn't just throwing moneyat its economic problems.
The Politburo has vowed to arrest the property market decline, after unveiling various measures to spur home-buying. It has also assured stronger efforts to help youth find jobs, while handing out cash to the needy, in an unprecedented consumption push.
The government is even roping in the private sector, in what could be seen as an admissionthat the 2020 clamp-down was a mistake.
If China can change its mind, so shouldglobal investors.
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Chinese stocks roar on stimulus-fueled optimism: https://reut.rs/3Boc21B
Ewen Chew is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
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