Market Concerns Likely Excessive


    Market concerns about China’s short-term macroeconomic prospects are likely excessive, says a Fitch Ratings report. It says while a protracted slowdown in China could have significant regional and global credit implications, recent policy action by the People’s Bank of China (PBOC) shows its authorities have the ability to support the economy through monetary policy ‒ cutting interest rates and reducing banks’ reserve requirement ratios. And they still retain significant room to loosen policy further, with the one-year benchmark lending rate at 4.6 per cent and RRR for large banks at 18 per cent. As well, the devaluation of the yuan against the U.S. dollar has been modest at 4.7 per cent while China’s currency has appreciated by almost 20 per cent since 2012. Over the medium term, the report sees the potential for a prolonged period of lower growth, with real gross domestic product growth settling at a rate well below seven per cent.