Whether the central bank cut interest rates and lowered the standard

Recently, China's May macroeconomic data was released one after another. A number of data were underperforming. Exports, investment, industrial growth, electricity consumption, new loans, and industrial producers' prices (PPI) all declined. The weak economic data has led many foreign investment banks to cut down China's economic growth expectations. At the same time, it has also triggered a debate on the direction of monetary policy. The expectation of lowering interest rates in the market is heating up, but there are still differences on whether to cut interest rates.

Many economic data did not perform well in May

The economic data in May has been released recently, and many economic data lacks highlights. Among them, the “troika” of exports, investment and consumption are lower than previous market expectations. The data showed that the export growth rate in May dropped sharply from 14.7% in April to 1%. The cumulative growth rate of investment continued to fall to 20.4% from 20.6%, while consumption only increased by 12.9%, which was basically the same as 12.8% in April.

At the same time, the growth rate of CPI, PPI, industrial growth rate and actual use of foreign capital also showed a decline. CPI increased by 2.1% year-on-year, 0.3 percentage points lower than that in April; PPI decreased by 2.9% year-on-year, setting a new low of 8 months since October 2012; industrial added value above designated size increased by 9.2% year-on-year, 0.1 percentage point lower than that in April. In May, the actual use of foreign capital in the country increased by 0.29% year-on-year, setting a new low of nearly four months.

In addition, as economists regard it as an important indicator that reflects the reality of the economy, the performance of data on electricity consumption and new loans in May is not optimistic. Among them, the total electricity consumption in May increased by 5.0% year-on-year, 1.8 percentage points lower than the 6.8% in April, and also lower than the same period last year; the new RMB loan was 667.4 billion yuan, down from 125.5 billion yuan in April, far lower. Previous market expectations.

A number of investment banks cut economic growth expectations

The weak economic data in May has raised concerns about the “stall” risk of the Chinese economy. Recently, a number of foreign investment banks, including Barclays Bank, ANZ Bank, and Morgan Stanley, have lowered their growth forecasts for the Chinese economy in 2013.

Among them, Barclays Bank adjusted China's economic growth rate from 7.9% in 2013 to 7.4%, and ANZ Bank reduced its 2013 China economic growth forecast from 7.8% to 7.6%. Morgan Stanley expects China's economic growth in 2013 from 8.2% fell to 7.6%. In addition, the World Bank has lowered its global economic growth forecast and expects the Chinese economy to grow at a rate of 7.7% this year.

The ANZ report pointed out that China's real economic data was significantly lower than expected, inflation was once again showing a downward trend, and credit growth also began to slow down, which indicates that China's economic slowdown is significantly faster than expected. The report of Barak Bank said that the new leader’s tolerance for the slowdown in economic growth was the main reason for the bank’s expectation of lowering economic growth. Morgan Stanley’s report also pointed out that lower growth forecasts reflect “the new government’s policy position that no longer emphasizes growth”.

Whether to cut interest rates and reduce the level of opinions

In the face of economic data that is not optimistic, whether monetary policy has been adjusted has led to speculation and disagreement, and the call for interest rate cuts in the market has begun to emerge. Liu Ligang, chief economist of ANZ Greater China, said that overall, the recovery of China’s economy has begun to encounter obvious difficulties, which means that monetary policy should be more accommodative. At the same time, as real interest rates begin to turn positive, China There is a relatively obvious space for interest rate cuts, and the performance of the integrated real economy is expected to cut interest rates soon. "China's monetary policy is facing the possibility of a clear turn."

Qiu Xiaohua, chief economist of Minsheng Securities, also said that the current overall feeling of moderate economic growth has not changed, and the degree of weakness has deepened. It is estimated that there will be no significant change in the situation in June. Compared with the first quarter, the growth rate in the second quarter is likely to be lower than expected. Striving for stability should appropriately increase the intensity of progress, and it is necessary to make a difference. In addition to implementing the measures of decentralization and decentralization, the government should also reduce the tax burden on enterprises. The central bank should cut interest rates in a timely manner and reduce the financing costs of enterprises.

Faced with the call to adjust monetary policy, many people raised objections. Lu Ting, chief economist of Bank of America Merrill Lynch Greater China, said that even if the CPI growth rate provides room for monetary policy adjustment, it is unlikely that the central bank will start rate cuts and RRR cuts. Unless the adjustment is large, the interest rate cuts and RRR cuts are very limited. Hu Chi, a researcher at the Research Center of the State-owned Assets Supervision and Administration Commission, also said that China's economy is in a stage of restructuring, transformation and upgrading, and it needs to make time for market operation and economic adjustment. There is no need to stimulate the economy and push up growth rates as before. The central government has repeatedly stated that it should tolerate a lower growth rate than before. Therefore, macroeconomic policies should remain stable and no measures such as interest rate cuts are expected in the near future.

The analysis said that whether to cut interest rates or lower the RRR will be a difficult choice to test the tolerance of the decision-making level on the decline in economic growth. The current economic slowdown is also a good time window for eliminating backward production capacity and optimizing economic structure. If the economy is operating at 7.5% or 7%, the decision-making level is acceptable, and the employment situation is not affected, then the policy will still wait and see.

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