Warrington Shaw - China's Economic Growth Slows

Warrington Shaw - People's Bank of China may be forced to intervene as China's rate of economic expansion declines.

Analysts at Warrington Shaw say China’s central bank will probably take steps to counter the negative effect of the trade dispute with the US as recent economic data indicates an economic slowdown for the world’s second-largest economy.

Warrington Shaw analysts say that although a degree of economic slowdown was expected, the recent lack of growth has been far more acute than was anticipated.

A recent survey revealed that expansion in China’s manufacturing sector stalled after 15 consecutive months of growth with export orders decreasing at the fastest pace in more than 24 months. Another survey confirmed weakening throughout China’s factory sector.

Last month, the official manufacturing index fell to 50.8, the lowest reading since February this year, down from 51.3 the month before and less than the 51.2 reading forecast by Warrington Shaw economists. A reading higher than 50 is a sign of growth while anything below shows contraction.

But the Caixin/Markit Manufacturing Purchasing Managers' Index (PMI) dropped by more than was anticipated last month to 50.0, down from 50.6 in August. Warrington Shaw economists had forecast a reading of 50.5.

Warrington Shaw analysts believe the People’s Bank of China may resort to reducing reserve requirement ratios for banks in an effort to support liquidity and expansion.

The reserve requirement ratio is the amount of money banks are required to hold in relation to their deposited funds. Reducing the required ratio will increase the availability of capital that financial institutions can lend and thereby reduce borrowing costs.

Source: Warrington Shaw


Categories: Lending and Borrowing

Tags: People's Bank of China, reserve requirement ratio, Warrington Shaw, WarringtonShaw


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