China to Hold Off on Stimulus Bazooka for Now

Investors hoping for a similar show of force to boost the slowing Chinese economy and calm nerves about global growth will be disappointed.

Beijing will be far more circumspect with its economic arsenal, and is unlikely to launch a big fiscal stimulus package in the coming months, experts say.

Instead, officials will continue to shore up growth with smaller, targeted measures, and further monetary easing.

There will, in other words, be no “big bazooka.”

“Spending will be rolled out incrementally and not in any big bang package,” analysts at Eurasia Group wrote in a research note. “New spending will largely come from the central government and it will not reach anywhere near the levels of the government’s massive 4 trillion yuan ($586 billion) response to the global financial crisis in 2008 to 2009.”

The People’s Bank of China has already cut interest rates, and lowered the amount of cash banks are required to keep on hand, in a bid to support growth. The central bank has also allowed the biggest devaluation of the yuan in decades, which should provide a boost to exporters.

via CNN

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza