The Chinese central bank will be reluctant to inject large volumes of cash into the economy next year as part of its monetary policy, according to adviser Sheng Songcheng, but will instead turn to cuts in taxes and bank reserve requirements to galvanize domestic demand.
Downward pressure on China’s economy will persist into 2019, Sheng is quoted in the 21st Century Business Herald as saying, and growth will moderate and slowly stabilise.
“Monetary policy will remain prudent and won’t be a ‘flood’”, Sheng said. “Otherwise, funds will likely flow into the property sector again.”
The central bank has already slashed the reserve requirement ratio (RRR) for banks four times this year, but has refrained from doing so with benchmark interest rates. At the beginning of 2018, Beijing was engaged in a strict deleveraging drive, progress of which policymakers fear could be undone if borrowing becomes cheaper again.
Earlier this week, the state-run China Securities Journal reported that the People’s Bank may reduce the RRR for banks as many as three times next year.