More stimulus expected from China

Although Chinese Central Bank has cut interest rates three times in six months recent economic data suggests more easing might come

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

China’s industrial output signalled to growth in April, while investment slowed to its weakest levels in more than 14 years, both missing expectations. Indicating that the world’s second largest economy has started the second quarter with weak data. 

Industrial production rose 5.9 percent, up from 5.6 percent in March, but below expectations of 6 percent. Non-rural fixed-asset investment - an important driver of the economy - rose 12 percent, expanding less than the median estimate of 13.5 percent, data from the National Bureau of Statistics showed Wednesday. Meanwhile, retail sales rose 10 percent last month, missing expectations of 10.5 percent. 

Last week’s data also showed weaker-than-expected exports, imports and inflation, suggesting that the Chinese economy is under pressure. According to analysts although stimulus measures taken by the People’s Bank of China (PBOC) have had a positive effect on the economy, more is needed. 

The bank has already cut interest rates three times in six months in order to help maintain growth. The latest cut came on Sunday as the bank cut its benchmark interest rate by 25 basis points to 5.1 percent and dropped the one year benchmark deposit rate to 2.25 percent. 

Analysts expect policymakers to apply more cuts to interest rates and reserve required ratios (RRR) in the coming months. 

Markets always welcome easing policies, thus despite weak economic data Asian shares advanced on Wednesday on hopes for further stimulus. MSCI's broadest index of Asia-Pacific shares outside Japan was off session highs but still up 0.3 percent. 

Japan's Nikkei stock index erased early losses and ended up 0.7 percent.

TRTWorld and agencies