On Wednesday, China adjusted significant monetary policy tools to stimulate its struggling economy, facing challenges from weak consumption and Donald Trump’s trade war.
The nation’s leadership is working to revive growth, which has not fully rebounded since the COVID-19 pandemic, hindered by sluggish domestic demand and a prolonged property sector crisis.
The situation is aggravated by a severe trade conflict, marked by the U.S. imposing tariffs up to 145% on numerous Chinese products, accompanied by Beijing’s retaliatory 125% duties on U.S. imports.
Pan Gongsheng, the head of China’s central bank, announced Beijing’s decision to reduce a key interest rate and lower the reserve requirements for banks to enhance lending.
He stated these policies aim to “support technological innovation, boost consumption, and promote inclusive finance, among other areas.”
A persistent crisis in the property sector, historically a major growth driver, continues to burden the economy.
To stimulate demand, Pan also mentioned that the bank would reduce the rate for first-time home purchases with loan terms over five years to 2.6%, from the previous 2.85%.
These actions present some of China’s most comprehensive efforts to boost the economy since September.
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However, analysts indicated a continuing shortfall of actual stimulus funds necessary to realign the economy.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, noted that while the policy measures are positive for the market and economy, the absence of new fiscal policy measures may be reserved for future use, should the economy slow further due to the trade war.
Gary Ng, senior economist for Asia Pacific at Natixis, expressed to AFP that more measures would be required to support growth, suggesting that more actions might follow if economic data remains unimproved.
Economists have cautioned that interruptions in trade between the U.S. and Chinese economies could endanger businesses, raise consumer prices, and potentially cause a global recession.
Last month, Beijing attributed a decline in manufacturing to a “sharp shift” in the global economy.
Exports increased by more than 12% in March as businesses hurried to beat Trump’s impending tariffs.
Beijing aims for approximately five percent annual growth this year, matching last year’s target, a figure many economists consider ambitious.
Last year, China implemented aggressive measures to reignite its economy, such as cutting interest rates, removing homebuying restrictions, increasing the debt ceiling for local governments, and enhancing support for financial markets.
However, after an intense market rally spurred by hopes of a substantial stimulus, enthusiasm declined when authorities did not specify a bailout figure.
Analysts now believe the impact of tariffs may lead Beijing to reconsider its cautious stance and advance fresh stimulus measures.
