lunes, 2 de marzo de 2015

lunes, marzo 02, 2015
Heard on the Street

China Takes the Easy Way Out

By Aaron Back

March 1, 2015 1:06 a.m. ET

    The People's Bank of China in Beijing. The PBOC on Saturday night cut benchmark lending and deposit rates. Photo: Petar Kujundzic/Reuters        


China’s central bank is starting to seem in a hurry to loosen policy. That is a worrying sign for its economy.

The People’s Bank of China on Saturday night cut benchmark lending and deposit rates, each by a quarter percentage point. It is the third major easing move by the central bank since November, following one previous rate cut and a reduction in the level of reserves banks must hold against deposits. Another rate cut had been expected, but the PBOC’s rapid pace is something of a surprise.

Recent data has been poor—China’s consumer-price index rose just 0.8% in January, a five-year low.

But most analysts put such weakness down to seasonal effects. The Lunar New Year holiday tends to drive up food prices, a big part of the consumer-price basket; it fell in mid-February this year versus late January in 2014.

The uncertainty as to what the monthly data means should be cleared up in a matter of weeks. Readings for industrial production and fixed-asset investment for both January and February will be published in early March. So will February’s inflation figures.

The PBOC apparently isn’t inclined to wait to see how bad things will get. The latest move betrays a sense of urgency. What could have the central bank so spooked?

Initial data points for February haven’t been encouraging. The official Purchasing Managers Index, a measure of manufacturing-sector sentiment, was in contractionary territory for the second straight month in February, data published Sunday morning showed.

And in a worrying sign, property prices fell 3.8% from a year earlier in February, an acceleration from the previous two months’ pace of decline, data from the China Real Estate Index showed Saturday. This undermines hopes the real-estate market is recovering.

More problems loom. China’s moves to rein in local-government debt will depress infrastructure spending by cities and provinces, dragging on growth.

The National People’s Congress, an annual meeting of China’s legislature, is due this week.

Speeches and appearances by Premier Li Keqiang and other officials will give a sense of what else may be in store by way of fiscal stimulus.

Looser fiscal policy at the central-government level is needed to offset local government austerity. More regulatory loosening, including lower down payment requirements on mortgages, could also be helpful.

The PBOC obviously sees risks gathering. But looser monetary policy alone won’t be enough to get China out of its funk.
 

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