China Policy Watch-Beijing isn't done yet
Sept 25 (Reuters) -While financial market have responded positively to China's much-delayed stimulus package, economists remain sceptical, pointing outthat even more supportwill be needed. Yet Beijing is probably notdone.
Chinese stocks and the yuan continued tosurge Wednesday, after Tuesday's unveiling of a wide swathe of economic stimulus measures. The offshore yuan extended its rally past the 7.0000 watermark to reach a new 16-month high of 6.9952. The Shanghai composite stock index surged 2.4% while Hong Kong's Hang Seng sprinted 2.3% higher.
The People's Bank of China delivered on its promise to cut rates, starting with a 30 basis-point easing of the one-year medium-term lending facility rate to 2.00%,as signalled on Tuesday. The seven-day reverse repo rate, earmarked to betrimmed by 20 bps to 1.50%, is likely next.
Still on the cards is a planned 50 bps slashing of banks' reserve requirement ratio, as well as a cut in the benchmark one-year and five-year loan prime rates; the latter affects household mortgages.
And there could be more in store beyond the telegraphed monetary policy easing moves. Tuesday's coordinated announcement ofthe economic boosters suggests policymakers' sense of urgency has risenanother notch or three.
While Beijing has acted judiciously to lower lending costs, support property markets, reduce mortgage burdens, and to juice the equity markets, there are a couple of major issues to address before naysayers will relent.
First, consumer confidence, which might pick up if property prices finally turn a corner, possibly via a knock-on effect from a sustained rally in equities.Second, joblessness, particularly among the youth, needs to be remedied. Beijing must leave no stone unturned if it wants to hit its 2024 GDP target.
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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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