Economists are warning of headwinds in the Chinese economy from a faltering stock market which they say will adversely impact personal consumption.
Liao Qun, chief economist of China CITIC Bank International Ltd., said consumers will be forced to tighten their belt to cut expenses, according to the Hong Kong Economic Journal.
Meanwhile, small and medium-sized enterprises will struggle to get financing, prompting further cuts in interest rates and banks’ reserve requirement ratio (RRR), he said.
Australia and New Zealand Banking Group Ltd. is predicting that the Chinese central bank will slash benchmark rates by 25 basis points by the end of the year and RRR by 100 basis points.
However, Premier Li Keqiang avoided mention of the ongoing turbulence during a State Council meeting on Wednesday, according to reports.
Li said he is confident China will achieve its growth target this year.
UBS A.G. said the average Chinese household has about 12 percent to 13 percent of their assets tied to stocks and properties.
If the financial sector declines to 2013-2014 levels, China could suffer a 0.5 percent fall in economic growth, UBS said.
Translation by Vey Wong
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