China presents new measures in the face of commercial uncertainty

China introduced a set of measures to boost domestic demand, with trade tensions threatening to worsen the country's economic slowdown, pushing up stocks.

Measures announced late Monday after a meeting of the State Council in Beijing, ranging from a tax reduction intended to encourage research expenditure on special obligations for infrastructure investment, have been proposed to respond in a more flexible way to "external uncertainty" which implied the fiscal adjustment already implemented for this purpose. year.

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Fiscal policy should now be "more proactive" and be better coordinated with financial policy, according to the statement – the signal that the Ministry of Finance will step up its contribution to support growth with the central bank. This year, the People's Bank of China lowered reserve requirement rates three times and introduced a series of measures for the private sector and small businesses.

The economic impact of reciprocal tariffs on trade still being unclear. with the US and the end of trade conflict is not in sight, officials are triggering multiple mechanisms to stabilize the economy. For now, this is done without resorting to large-scale stimulus measures or widespread monetary easing, as public servants remain engaged in a multi-year campaign to stem the growth of debt.

"I do not think there is significant flexibilization or a 180 ° change in policies, it's more a question of adjustment," said Larry Hu, chief of the government. Chinese economy at Macquarie Securities in Hong Kong. "Officials are making corrections, offsetting the deleveraging offensive that was too fast and violent."

The yuan depreciated on the domestic market of 0, 65% to 6.8295 per dollar, the lowest level since June 2017 Stocks advanced in Shanghai and Hong Kong

For Nomura Holdings Inc., the statement marks "the beginning of fiscal stimulus." Guotai Junan Securities Co. said it "confirmed the trend of easing monetary policy", and Deutsche Bank AG considers it "as a confirmation that the policy position is moving towards flexibilization." Standard Chartered Bank Plc said the policies will be slightly more flexible to support domestic demand, but that there is no intention to introduce a broad stimulus.

The meeting reiterated the statement that China will find a balance between flexibility and adjustment and maintain liquidity. "Reasonable and sufficient". He also promised to improve the transmission of monetary policy, an expression that the People's Bank of China had abandoned since a campaign to reduce credit growth initiated in late 2016.

There was no there is no official change in the central bank's "cautious" and "neutral" policy, but the measures announced in recent days indicate that civil servants are taking a supportive stance in the midst of the trade dispute with the United States. These include the record money injection for banks on Monday and the release of new guidelines for the badet management industry.

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% in the second quarter, the slowest expansion since 2016. Growth is expected to slow this year to 6.5%, according to the official target.