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China steps up economic plans

January 21, 2022

Beijing (Jan 21)  There has been lots of talk from China over the last week about how the administration is looking to support the economy. Friday has been no different as the PBoC, cabinet adviser Zhu and Premier Li have all been on the wires early in the EU session and overnight. All of the rhetoric has been the same with most of the chatter fixed on lending.

First and foremost, one of the key headlines was when Cabinet Adviser Zhu said he is "confident China can achieve economic growth of around 5.5% in 2022". He then added, "Fed's rate rise, balance sheet cut could have a very big market impact" as if to send a warning signal to the U.S. central bank. There was a headline that said that China will see a smaller spillover from the impact of the Fed moves than before. Maybe this is due to the state presenting itself as more independent.

These comments were followed up by Premier Li whose comments were on state television. He said that the nation will appropriately step up policy support for the economy. He added that he will not resort to flood-like stimuli. Having said that. Some of the tools may not be traditional as the central bank the PBoC added the open toolbox puts focus on less-known options.

In regards to how the country will do this, there were some clues. The administration is said to be urging banks to boost lending after the slow start to this year. and there has also been good news for base metals as there has been some guidance to expand EV charging facilities by 2025. A reduction in lending rates has also been observed this week.


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