PBOC Seen Switching to Neutral as Economy Picks Up, Survey Shows

  • Economists upgrade 2016 and 2017 China GDP growth forecasts
  • PBOC is seen holding benchmark lending rate until 4Q 2017

China will refrain from more aggressive monetary stimulus as economic growth picks up, economists surveyed by Bloomberg News forecast.

Gross domestic product will expand 6.7 percent this year and 6.4 percent in 2017, according to the median survey of 53 economists conducted Oct. 19 to Oct. 24, up from 6.6 percent and 6.3 percent seen in the previous forecast. The People’s Bank of China will hold one-year lending and deposit rates unchanged until at least the last quarter of next year, the results show. Last month, economists had expected a cut to both in the first quarter of 2017.

A growth pace comfortably exceeding the government’s minimum target of 6.5 percent gives policy makers room to carry out reforms to reduce excessive industrial capacity and curb swelling debts. Surging property prices have prompted new purchase restrictions in at least 21 cities since September as policy switches from stimulus mode to reining in financial risks.

The world’s second-largest economy expanded at a steady pace of 6.7 percent in the first three quarters of 2016 as factory profits recovered, producer prices exited more than four years of deflation, and robust retail spending remained a prop for growth.

Economists also dialed back forecasts for reductions to the required reserve ratio for major banks.

With monetary policy now seen as on hold, the government will probably expand fiscal spending to pick up the slack. Analysts surveyed expected the fiscal budget to reach 3.6 percent of the GDP in the fourth quarter, versus 3.3 percent in the previous survey.

— With assistance by Xiaoqing Pi, and Cynthia Li

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