Date
22 July 2017
Premier Li Keqiang says policymakers have a lot of tools in the box to combat a slowdown in the world’s No. 2 economy. Photo: Bloomberg
Premier Li Keqiang says policymakers have a lot of tools in the box to combat a slowdown in the world’s No. 2 economy. Photo: Bloomberg

China widens efforts to bolster flagging economy

China is ramping up spending and considering measures to stimulate bank lending in a fresh effort to boost the economy.

The government is making more money available to local governments to fund new infrastructure projects, Bloomberg reports, citing people familiar with the matter.

Meanwhile, the State Council is considering lowering the minimum ratio of provisions that banks must set aside for bad loans, a move that would free up additional cash for lending.

Premier Li Keqiang said policymakers “still have a lot of tools in the box” to combat a slowdown in the world’s No. 2 economy, days after People’s Bank of China governor Zhou Xiaochuan broke a long silence to talk up confidence in the nation’s currency, the yuan.

Also, the biggest economic planning agencies on Tuesday promised to reduce financing costs to help curb overcapacity.

“Policymakers are battling to prevent any further slowdown, which could escalate into a hard landing,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore.

China is seeking to maintain economic growth of at least 6.5 percent a year through 2020 to meet its pledge of creating a “moderately prosperous society”.

The latest measures are a clear escalation of policy support ahead of the National People’s Congress meeting in March, said Zhao Yang, the Hong Kong-based chief China economist at Nomura Holdings Inc.

“We see strong headwinds in the economy, and believe that the government needs more policy support to reach their growth target for this year, which is likely to be 6.5-7 percent,” he said.

The economy  grew 6.8 percent last quarter, the slowest pace since the global financial crisis.

The sluggish performance came against the backdrop of a stock-market rout and a sudden devaluation in the yuan that roiled investors amid fears of further weakness.

Signs are emerging that six interest-rate cuts by the People’s Bank of China since November 2014, along with other measures to boost lending, are starting to flow through.

PBOC data released Tuesday showed that aggregate financing surged to 3.42 trillion yuan (US$525 billion) in January, compared with the median forecast of 2.2 trillion yuan in a Bloomberg survey.

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CG/RA

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