To counter soft domestic demand and a property crisis, China has boosted infrastructure investment and ploughed funds into high-tech manufacturing.
China’s economic growth has been uneven this year, with industrial output outstripping domestic consumption, fanning deflationary risks amid the property downturn and mounting local government debt.
While solid Chinese exports have provided some support, rising trade tensions now pose a threat.
China’s exports rose 8.6 per cent in June from a year earlier, and imports unexpectedly shrank 2.3 per cent, data released this month showed, suggesting manufacturers are frontloading orders to get ahead of tariffs from trade partners.
Consumer prices meanwhile grew for a fifth month in June but missed expectations, while factory deflation persisted, with government measures unable to meaningfully lift domestic demand.
China’s central bank governor Pan Gongsheng last month pledged to stick to a supportive monetary policy stance and said the bank will flexibly use policy tools including interest rates and reserve requirement ratios to support economic development.
Analysts polled by Reuters expect a 10-basis points cut in China’s one-year loan prime rate as well as a 25-basis points cut in banks’ reserve requirement ratio in the third quarter.
Citi analysts expect the government to unleash another round of property-supporting measures after a meeting of the Politburo, a top decision-making of the ruling Communist Party expected in late July.
Authorities in May allowed local state-owned enterprises to buy unsold completed homes, with the central bank setting up a 300 billion yuan relending loan facility for affordable housing.
