PBOC remains stable at rates despite growth risk
Nevertheless, Beijing appears unrelated about the economic background despite the ongoing effects of the American tariff. People’s Bank of China (PBOC) placed one year and five -year loan prime rates (LPRS) on Monday, 22 September at 3% and 3.5% respectively. Low interest rates may promote credit and expenses demand.
According to CN Wire, economists of Goldman Sachs reacted to the comments of PBOC Governor Pan Gongsheng on Monday, 22 September, stating:
“PBOC is no hurry to reduce monetary policy, Goldman Sachs’ Economic Research Team says that Gove. Pan Gongsheng’s joint media briefing on Monday cite a comment in a joint media briefing.
PBOC may wait to see how the US-China trade talks play, with any lifting of tariff to support the development goal of Beijing. On Friday, September 19, President Trump and Chinese President Xi Jinping allegedly made a productive call, which discussed various issues before the upcoming APEC summit.
Next to Friday’s call, Trump finished $ 400 million in military aid for Taiwan. Some analysts witnessed the move as a possible concession with the aim of facilitating business talks.
Mainland and Hong Kong equity rally
Increasing concerns about the economy have demanded mainland-list shares. The CSI 300 and Shanghai Composite Index are 0.01% and 1.67%, month-by-month below respectively. In contrast, the Hang Seng index has increased by 4.3%.
Despite the September pullback, the CSI 300 and the Shanghai Composite Index are 14.3% and 13.2% year-over year. While concerns are about the 5% GDP development target of Beijing, the expectations of further policy measures support the mainland equity.
In the absence of further policy support, the mainland and Hong Kong-list stock remain in contact with a sharp upside. The US-China trade talks, China’s housing market, demand for cooling, and a deteriorating labor markets remain a significant risk.
Nevertheless, further stimulation, the housing area and an American-China trade agreement can raise the spirit. Lower tariffs can revive external demand and reduce margin pressure, potentially increase job work and domestic demand.
