China 'Likely to Cut Rates' in Second Half, State Researcher Says

China is likely reduce interest rates and the reserve ratio that banks must maintain in the second half of this year, a state researcher has said.

The news on probable moves to support the economy was reported by the China Securities Journal on Tuesday, which cites policy advisers and economists.

China’s economy rebounded faster than expected in the first quarter but lost momentum at the beginning of the second quarter.

The economy is grappling with a high unemployment rate, a prolonged crisis in the real estate sector, which has saddled provincial governments with huge debts, and rising geopolitical tensions.

ALSO SEE:

SEC Case Against Binance And Zhao Spurs $800m in Outflows

Zhang Ming, a researcher at the Chinese Academy of Social Sciences, a top government think tank, told the state newspaper that low inflationary pressures in China would provide room for monetary easing.

China can consider further rate cuts and target the reserve requirement ratio (RRR) cuts to lower lending costs, Zhang said.

Li Chao, chief economist at Zheshang Securities, also expects potential rate cuts and RRR cuts in the second half of this year, the report said.

Li expects the US Federal Reserve may enter the rate-cutting cycle in the fourth quarter, giving further room for Beijing to ease monetary policy.

China in March cut the RRR for the first time in 2023, but has kept its benchmark lending rate unchanged this year, as widening yield differentials with the United States limited the scope for substantial monetary easing.