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

David Millhouse

Head of China Research - Forsyth Barr Asia

Forsyth Barr Asia

Macroeconomics

The PBOC has announced a 100bps cut of Banks&rsquo; Reserve Requirement Ratio, in line with our estimates, but larger than street consensus.&nbsp; We believe this is a very positive step from the PBOC, and certainly warranted by the data released&nbsp;last week.&nbsp;The weakness in growth momentum has not been a surprise to us, but our concern coming into this year had been that the government were too sanguine about the structural negatives which were impeding economic momentum, and would be too slow to act.&nbsp; We still expect growth risks, deflation risks, and NPL risks to be VERY prevalent near term, and more work is unquestionably needed.&nbsp; Thus far however, we have been very impressed with the recent actions from the government, not only on the monetary side, but more importantly with the direct measures taken to mitigate structual risks.

The PBOC has announced a 100bps cut of Banks&rsquo; Reserve Requirement Ratio, in line with our estimates, but larger than street consensus.&nbsp; We believe this is a very positive step from the PBOC, and certainly warranted by the data released&nbsp;last week.&nbsp;The weakness in growth momentum has not been a surprise to us, but our concern coming into this year had been that the government were too sanguine about the structural negatives which were impeding economic momentum, and would be too slow to act.&nbsp; We still expect growth risks, deflation risks, and NPL risks to be VERY prevalent near term, and more work is unquestionably needed.&nbsp; Thus far however, we have been very impressed with the recent actions from the government, not only on the monetary side, but more importantly with the direct measures taken to mitigate structual risks.

CHINA MACRO/POLICY: Thoughts post the 100bps RRR cut - POSITIVE MOVE . Expect more easing near term