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Zawya
12 hours ago
- Business
- Zawya
China central bank pledges to adjust policy pace based on internal, external economic conditions
China's central bank said on Friday that it would adjust the pace and intensity of policy implementation based on internal and external economic and financial situations. The People's Bank of China, in a summary of a quarterly meeting held by its monetary policy committee, said that it would guide financial institutions to step up credit supply, and push for lowering of social financing costs. (Reporting by Yukun Zhang, Ethan Wang and Kevin Yao. Editing by Jane Merriman)
Yahoo
28-04-2025
- Business
- Yahoo
Analysis-China holds off on new stimulus, shows composure in US trade war
By Kevin Yao BEIJING (Reuters) -China has advanced this year's stimulus plans but is holding off on fresh measures as it tries to maintain composure, betting on Washington blinking first in a protracted trade war. The Communist Party's elite decision-making body, the Politburo, pledged on Friday to support firms and workers most affected by triple-digit U.S. tariffs on Chinese goods, but stopped short of announcing additional deficit spending. The decision to withhold additional stimulus disappointed investors, leading to a 3% slump in Chinese real estate stocks on Monday, despite official efforts to assuage market concerns over a sharp downturn in growth. Beijing is already in a higher stimulus gear, which it can maintain over the coming months to mitigate the pain of losing, at least temporarily, its biggest customer, analysts and policy advisers said. The lack of new stimulus does not point to a capitulation on its high growth ambitions this year - matching last year's growth of around 5% - but a strategy to remain flexible amid the tariff war with President Donald Trump's administration. "It's simply too early for Beijing to go all-in," said Larry Hu, chief China economist at Macquarie. "It's much easier for Trump to walk back his tariff threat than it is for Beijing to walk back its stimulus announcement. Moreover, policymakers could announce new stimulus at any time." China has already brought forward the implementation of its 2025 stimulus plans and that will continue, Hu said. In January-March, government spending rose 4.2% from a year earlier, while revenue fell 1.1%, resulting in a fiscal deficit of 1.26 trillion yuan ($173 billion), the highest first-quarter reading on record, government data showed. Furthermore, local governments issued nearly 1 trillion yuan in new special bonds over that period, up nearly 60% from a year earlier. The People's Bank of China has also escalated lending to state-backed investors to support the stock market. Growth of China's total social financing, a broad measure of credit and liquidity, hit a 10-month high of 8.4% in March, central bank data showed. New loans to non-bank institutions hit 284.4 billion yuan in February - the second-highest reading since a peak of 886 billion yuan in July 2015, China's last major stock market crisis. Non-bank loans fell in March but analysts expect April to be strong. Policy advisers say more can be done if needed. "We have policy reserves in place - various contingency plans have already been prepared," said a policy adviser who spoke on condition of anonymity due to the topic's sensitivity. "The timing of new policies will depend on how big the tariff impact turns out to be." A second adviser said room for policy easing remained "ample," but he added that new measures "cannot be rushed." "We cannot afford to lose that flexibility," he said. "We still need to assess how the situation evolves before deciding how to proceed." The Politburo statement also flagged further interest rate cuts and liquidity injections, such as by reducing the amount of cash banks are required to hold as reserves, but a source close to the PBOC said the central bank was in no rush to trim as the tariffs' ultimate impact was still unclear. "The external environment has been changing so fast," the source said, but added: "If the data starts to deteriorate in coming months, the central bank will certainly roll out monetary stimulus." GROWTH RISKS The Trump administration struck a more conciliatory tone last week, saying the tariffs were unsustainable and signaling openness to de-escalating the trade war. But Beijing appears to be hunkering down, denying Trump statements that negotiations are taking place, and calling on Washington to remove the tariffs. Eurasia Group's China director Dan Wang said that not giving ground to Trump could appease the domestic audience, but internally, Chinese officials are "fully aware of the risks" to growth. She estimates China needs 2 trillion yuan in new stimulus to keep this year's economic growth from falling below 4%. Morgan Stanley analysts also expect 1 trillion yuan to 1.5 trillion yuan in new measures in the second half of the year, "which would not fully offset the tariff shocks." Ting Lu, chief China economist at Nomura, says announcing a new raft of stimulus now would be akin to Beijing "blinking first in the game of chicken by showing nervousness and chaos." Instead, China wants to "present an image that it is calm and well-prepared" for the trade war, he said. But the risk is that of a bigger than expected shock to the economy in the near term, which would take longer - and might require greater policy efforts down the line - to recover from. "Their approach is to watch and wait for the U.S. to collapse slowly," said Alicia Garcia-Herrero, chief economist for Asia Pacific at Natixis, but adding "this approach is very costly." ($1 = 7.2841 Chinese yuan) Sign in to access your portfolio
Yahoo
15-04-2025
- Business
- Yahoo
China's Q1 economic growth likely to slow as tariffs darkens outlook
By Kevin Yao BEIJING (Reuters) - China's economy is expected to have slowed in the first quarter in the face of a prolonged property downturn, as policymakers brace for the impact of hefty U.S. tariffs that analysts say pose the biggest risk to the Asian powerhouse in decades. President Donald Trump has ratcheted up tariffs on Chinese goods to eye-watering levels, prompting Beijing to slap retaliatory duties on U.S. imports in an intensifying trade war between the world's two biggest economies that markets fear will lead to a global recession. Data on Wednesday is forecast to show China's gross domestic product (GDP) grew 5.1% in the January-March quarter from a year earlier, slowing from 5.4% in the fourth quarter, according to a Reuters poll. The outlook is expected to dim further as Washington's tariff shock hits the crucial export engine, heaping pressure on Chinese leaders as they try to keep the world's second-largest economy on an even keel and prevent mass job losses. A string of recent data has pointed to an uneven economic recovery, with bank lending beating expectations and factory activity picking up speed. But higher unemployment and persistent deflationary pressures are fuelling concerns over weak demand. Moreover, analysts say a surge in China's March exports - driven by factories rushing shipments to beat the latest Trump tariffs - will reverse sharply in the months ahead as the hefty U.S. levies take effect. "Before the tariff storms hit, China's GDP growth likely eased but remained solid, thanks to the recovery in domestic demand," analysts at Societe Generale said in a note. "Overall, the GDP report should show that stimulus is working, but the support will not stop here with bigger tariff challenges ahead. The policy put is on." While several other countries have been swept up in U.S. tariffs, Trump has targeted China for the biggest levies. Last week, Trump lifted duties on China to 145%, prompting Beijing to jack up levies on U.S. goods to 125% and dismissing U.S. trade actions as "a joke". On a quarterly basis, the economy is forecast to have expanded 1.4% in the first quarter, slowing from 1.6% in October-December, the poll showed. Separate data for March is expected to show retail sales, a key gauge of consumption, rose by 4.2% after gaining 4.0% in January-February, while factory output growth is expected to ease to 5.8% from 5.9% in the first two months. The government is due to release first quarter GDP data, along with March activity data, at 0200 GMT on Wednesday. For 2025, the economy is expected to grow at a subdued 4.5% pace year-on-year, the poll showed, slowing from last year's 5.0 pace and falling short of the official target of around 5.0%. UBS has downgraded its forecast on China's 2025 growth to 3.4% from 4%, on the assumption that Sino-U.S. tariff hikes will remain in place and that Beijing will roll out additional stimulus. "We think the tariff shock poses unprecedented challenges to China's exports and will set forth major adjustment in the domestic economy as well," analysts at UBS said in a note. AMPLE ROOM FOR STIMULUS Policymakers have repeatedly said the country has ample room and tools to bolster the economy and premier Li Qiang this month pledged to roll out more support measures. Beijing has put boosting consumption as the top priority this year as they try to cushion the impact of the Trump administration's tariffs on its trade sector. The Politburo, a top decision-making body of the ruling Communist Party, is expected to hold a meeting later this month to set its policy agenda for the coming months. In March, China unveiled fiscal measures, including a rise in its annual budget deficit. Officials have flagged more fiscal and monetary stimulus to cope with rising headwinds. That followed a blitz of monetary easing steps late last year. Earlier this month, Fitch downgraded China's sovereign credit rating, citing rapidly rising government debt and risks to public finances, suggesting a tricky balancing act for policymakers seeking to expand consumption to guard against a trade downturn. Sign in to access your portfolio
Yahoo
15-04-2025
- Business
- Yahoo
UBS lowers forecast for China 2025 GDP growth to 3.4% on tariff hikes
By Liz Lee and Kevin Yao BEIJING (Reuters) - UBS has downgraded its China GDP growth forecast to 3.4% for 2025, on the assumption that tariff hikes between it and the United States will remain in place and that Beijing will roll out additional stimulus, it said in a report on Tuesday. The Swiss investment bank's previous forecast for China's growth this year was 4%. It maintained its 2026 forecast at 3%. The bank also expected China's exports to the U.S. to fall by two-thirds in the coming quarters and overall Chinese exports to fall by 10% in U.S. dollar terms in 2025, by also factoring in slower American and global economic growth. "We think some of China's other trading partners may also raise tariffs on Chinese goods in the coming months, but likely only on specific products and not in similar magnitudes as the U.S. tariffs," it said. UBS said it was extremely difficult to predict how the tariffs between the U.S. and China could evolve, but said it is still possible that the world's two largest economies could engage in discussions and negotiations, and for both to "roll off some of the recent tariff hikes in the next month or two".
Yahoo
13-04-2025
- Business
- Yahoo
China's March bank loans seen rebounding as trade tensions escalate
By Ethan Wang and Kevin Yao BEIJING (Reuters) - China's new yuan loans likely rebounded in March after a sharp fall in February, a Reuters poll showed on Wednesday, as policymakers pledged fresh stimulus to counter mounting economic headwinds amid a worsening global trade war. Banks are estimated to have issued 3 trillion yuan ($408.19 billion) in net new yuan loans last month, up from 1.01 trillion yuan in February, according to the median estimates of 11 economists. The new lending forecast would be lower than the 3.09 trillion yuan issued in new loans in March 2024. "Overall credit demand may have stayed soft as the bills discount rate stayed subdued throughout the month," Citi analysts said in a note. "Meanwhile, household borrowing may have stayed low despite the easing of quota of consumer loans." New bank lending in China plunged more than expected in February after hitting a record high in January. Total lending would reach 9.14 trillion yuan in the first quarter if the March reading matches forecasts, compared with 9.46 trillion yuan in the same period last year. China has set an ambitious 2025 growth target of "around 5%", though analysts believe it may be increasingly difficult to achieve amid escalating U.S.-China trade tensions. President Donald Trump has hiked tariffs on Chinese goods this year to 104%, after China retaliated by matching his "reciprocal" duties. Citi this week downgraded its China GDP forecast to 4.2% from 4.7% for 2025, warning that higher U.S. tariffs could drag China's growth by at least 1.5 percentage points on an annualised basis. In a sign authorities may step up stimulus to shield the economy from external shocks, the state-run People's Daily said in a commentary last Sunday that China has "ample room" for monetary easing, including reserve requirement ratio cuts and interest rate reductions. The paper also flagged the potential for further expansion of fiscal deficits, special bonds and special treasury bonds. Separately, four of China's largest state-owned banks last week unveiled around $72 billion in recapitalisation plans, following through Beijing's pledge to help the lenders increase capital buffers and manage asset quality strains. Outstanding yuan loans were expected to rise 7.3% in March from a year earlier, the poll showed, unchanged from the pace in February. Broad M2 money supply growth last month was seen at 7.1%, quickening from 7.0% in February. Total social financing (TSF), a broad measure of credit and liquidity in the economy, likely grew to 4.8 trillion yuan in March from 2.23 trillion yuan in the previous month. Outstanding TSF rose 8.2% in February, up from 8.0% in January and December. ($1 = 7.3495 Chinese yuan) Sign in to access your portfolio
