In China’s World, Growth Worries Trump Inflation Fears
The world’s economic superpowers are on opposite monetary paths. Only time will tell which one is right, but the slowdown is alarming.
A long, strange trip.
Photographer: Qilai Shen/BloombergTalk about decoupling. The world's two largest economies are greeting the approaching second anniversary of the pandemic very differently. China's central bank is trying to combat a slowdown while the Federal Reserve is fretting about inflation and signaling a hastier withdrawal from stimulus. It’s too early to tell which course will be right, but the hurdles to growth sure seem daunting.
The People's Bank of China said late Monday it will lower the amount of cash most banks are required to hold in reserve by 0.5 percentage point, releasing 1.2 trillion yuan ($188 billion) of liquidity. The trim is the second this year and was foreshadowed by Premier Li Keqiang, who recently warned of downside risks to China's growth, which slackened last quarter. The PBOC’s step is unlikely to be the last: Bloomberg Economics' David Qu anticipates another 50-100 basis points in cuts next year.