China revealed a new set of policies to boost growth. The Central Bank announced a reduction of 100bp in the Reserve Requirement Ratio, effective from 15 October. This move is expected to release RMB1.2tn in liquidity of which RMB450bn will be used to pay off maturing medium-term lending facility loans. Moreover, the government announced a rise in export tax rebates to support corporates in the context of rising protectionist policies from the U.S. These announcements came with no surprise as the economic data flow has been broadly negative recently: industrial activity was weak in July and August; the manufacturing PMI pointed to slower growth in September; and Chinese stock markets and the RMB remain stuck at low levels. Looking ahead, we expect monetary authorities to maintain their accommodative stance and another RRR cut (by -25bp to -50bp) could be possible if activity indicators remain weak in Q4. We maintain our full-year growth forecast of +6.6% this year and +6.3% in 2019.
