The robust rate of credit expansion this year doesn’t rule out continued monetary easing. We think that’s still needed to help the economy find a solid footing, though the focus should increasingly shift to targeted measures.
Broad-based easing is still needed to provide liquidity to the banking sector so it can sustain the expansion in credit. The need is higher in 1H and we continue to see the possibility of reductions in the reserve requirement ratio, with the first potentially coming as early as in April.
There’s less of a necessity for an interest rate cut, in our view.
Targeted measures are important for channeling funding to sectors in greater need of funding -- small, private firms -- to lower their effective borrowing costs.
The result of the People’s Congress was to declare victory in the containment of the shadow banking sector and to signal a clear willingness to boost credit growth to reinvigorate speculative activity. That has resulted in the stock market popping on the upside, reversing the pattern of deterioration that prevailed for all of 2018.Click HERE to subscribe to Fuller Treacy Money Back to top