China is expected to keep its stimulus measures including interest rate cuts in 2016 to underpin economic growth, Bloomberg economists have said.
“The central bank will likely make two 25 bp cuts in the loan rate and multiple cuts in the reserve requirement ratio in the first half,” said the economists in a report called “China’s Economy in 2016”.
However, “space for rate cut is limited as the deposit rate approaches zero,” according to the Bloomberg report.
To combat an economic slowdown, China’s central bank has cut benchmark interest rates five times since last November and lowered banks’ reserve requirement ratio three times since February.
The Ministry of Finance has accelerated public spending and rolled out a 3.2 trillion yuan ($494 billion) debt swap for in-the-red local governments, the Bloomberg report said.
The Bloomberg economists expected more pro-growth exchange rate and fiscal policy adjustments next year, adding that China has “enough policy space to keep GDP growth “close to 7 percent, but not for much longer.”