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PBoC steps up support – ABN AMRO

Arjen van Dijkhuizen, analyst at ABN AMRO, points out that the Chinese authorities have continued to step up support to counterbalance the drags from the financial deleveraging campaign and the trade conflict with the US, in line with their expectations.

Key Quotes

“Last Friday, the PBoC announced it would cut the reserve requirements ratio for banks by another 100 bp (in two steps of 50 bp, per 15 and 25 January). That followed a cumulative 250 bp RRR cut throughout 2018.”

“The RRR cuts should be seen in the context of supporting credit flows to the real economy, particularly to the private sector including SMEs, as well as safeguarding bank system liquidity in the run-up to the Chinese New Year break (early February).”

“The stepping up of support follows more indications that Chinese industrial sector is slowing. In December, for the first time since early 2016, both the manufacturing PMIs from Caixin and NBS fell below the neutral 50 mark.”

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