Experts predict that China’s central bank will implement further policy measures to safeguard the country’s economic recovery from external uncertainties. This comes after the People’s Bank of China cut the reserve requirement ratio for financial institutions by 0.25 percentage points on March 27. The move is expected to inject roughly 500 billion yuan ($72.67 billion) into the market and help stabilize borrowing costs, strengthening domestic banks’ ability to counteract any spillover of global financial risks. The decision also signals China’s proactive approach to supporting the economy as the cut comes amidst economic and financial data showing improvement.
Zhong Linnan, a senior macroeconomic analyst at GF Securities, noted that more support in terms of monetary, fiscal, and industrial policies may be in the pipeline, as the central bank emphasized that the cut is part of “an optimal combination of macro policies” to serve the real economy. Experts also suggest that the loan prime rate may slightly decline this year, which could bolster domestic demand.
Although the external environment remains fragile due to the US Federal Reserve and other central banks’ rate hikes, Yan Se, an associate professor of applied economics at Peking University’s Guanghua School of Management, believes that China is still capable of achieving its annual GDP growth target of around 5 percent. He predicts that the country’s GDP will expand by more than 5.5 percent this year due to the economy’s internal momentum to recover from the impact of COVID-19, continuous policy support, and last year’s low comparison base.