China’s leaders will switch to stimulus mode to support an economy that expanded at the weakest pace since 2009 last quarter, economists said.
The central bank will inject more cash into banks, cut the amount of reserves lenders must keep, reduce interest rates, and steer money market levels lower, according to banks including Macquarie Group Ltd., HSBC Holdings Plc, and Nomura Holdings Inc. The government is also expected to loosen fiscal settings and expedite infrastructure spending plans.
The good news is Premier Li Keqiang and People’s Bank of China Governor Zhou Xiaochuan have far more policy firepower than counterparts in Japan and Europe. The bad news: stimulus so far hasn’t spurred a revival, as banks remain reluctant to lend and the outlook for external demand remains uncertain.