» China: Is the PBOC Running Out of Time? Decision Economics

China: Is the PBOC Running Out of Time?

Posted July 2, 2012 by Editor

[private]For the People’s Bank of China (PBOC), the country’s central bank, and for the government, these data are additional warnings that their sanguine reaction to the shocks hurting the economy (from abroad: recession in Europe; from within: a period of very tight monetary policy, only slightly eased in the past few months) leaves them behind the curve and greatly vulnerable to deteriorating global conditions, or –perhaps even worse—to the danger that the economy’s own internal dynamics will converge towards a much weaker rate of growth than anticipated, involving higher political costs for the leadership, and a greater and more costly stimulus-effort later on.

With inflation now at very low levels and possibly heading towards the zero mark, even if the Chinese authorities continue to refrain from substantial fiscal stimulus, they have very little choice but to take further steps to ease policy, with the probability of additional reserve-requirement and interest-rate cuts in the near-term approaching certainty.

7-2-12–EMG INDICATORS AND INSIGHTS _China PMIs_[/private]