The People's Bank of China (PBOC) on Wednesday announced major monetary policy easing measures, including an interest rate cut and a reduction in banks' reserve requirements, as the country grapples with weak consumption, a prolonged property crisis, and intensifying trade tensions with the United States.
Pan Gongsheng, head of China's central bank, said at a news conference that the moves were intended "to support technological innovation, boost consumption, and promote inclusive finance, among other areas". He added that the bank would cut the rate for first-time home purchases with loan terms over five years to 2.6%, down from 2.85%.
The central bank's latest steps mark some of the most significant interventions since September, aimed at countering a slowdown that has lingered since the COVID-19 pandemic and worsened amid faltering domestic demand.
The housing sector, once a vital engine of Chinese economic growth, continues to drag, despite a series of reforms. Analysts have consistently flagged the property slump as a major obstacle to recovery.
Beijing is also locked in a trade standoff with Washington, where US President Donald Trump has imposed tariffs as high as 145% on Chinese goods. In retaliation, China has levied duties of up to 125% on American imports, further weighing on economic sentiment.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted in a report, "The policy measures released today are positive for the market and the economy." However, he cautioned, "What is missing in this conference is new fiscal policy measures, which I think may be reserved for the future, if the economy suffers from the trade war and shows clear signs of slowdown."
Gary Ng, senior economist for Asia Pacific at Natixis, echoed the sentiment, telling AFP, "It will take more to support growth. If economic data does not improve, we will likely see more actions down the road."
Despite efforts, signs of stress remain. Beijing recently blamed a "sharp shift" in the global economy for a decline in manufacturing. In March, exports spiked more than 12% as businesses scrambled to ship goods ahead of the latest tariff wave.
While China is targeting 5% growth this year—matching last year's target—many economists view that figure as optimistic given current headwinds.
In 2024, Beijing introduced a slew of aggressive measures to re-energise its economy, including slashing interest rates, scrapping homebuying restrictions, and raising local government debt ceilings. However, hopes of a massive fiscal stimulus faded after authorities held back from announcing a concrete bailout package.
Economists now say the combined pressure of a property downturn and trade conflict may prompt Beijing to reconsider its cautious stance and deploy further stimulus in the coming months.
AFP
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