Head of China Research - Forsyth Barr Asia, Forsyth Barr Asia

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Macroeconomics

<p>We had thought the PBOC would move this weekend, however we were hoping they would move to reduce rates by 50bps. The economy is unquestionably weaker than expected (and continues to have further downside risk in our view, despite recent easing), and inflation is benign. We believe the PBOC will need to cut lending and deposit rates again in the next 2-3 months, as downside risks are unlikely to subside in the coming months.&nbsp; We have written several notes on the downside risks to China growth, and how we believe several more actions are needed to address structural risks which is hindering economic momentum. In the coming 3 months we expect to see accelerated easing measures from China, in multiple channels.&nbsp;</p>

We had thought the PBOC would move this weekend, however we were hoping they would move to reduce rates by 50bps. The economy is unquestionably weaker than expected (and continues to have further downside risk in our view, despite recent easing), and inflation is benign. We believe the PBOC will need to cut lending and deposit rates again in the next 2-3 months, as downside risks are unlikely to subside in the coming months.&nbsp; We have written several notes on the downside risks to China growth, and how we believe several more actions are needed to address structural risks which is hindering economic momentum. In the coming 3 months we expect to see accelerated easing measures from China, in multiple channels.&nbsp;

CHINA MACRO: Our view post the 25bps rate cut – MORE EASING NEEDED