China's fiscal and monetary policy mix to stay accommodative

Although the pace of China's broad-based monetary easing is likely to slow, the fiscal policy is expected to be more expansionary, with increasing local government spending to support investment, particularly in infrastructure. 

The possible announcement of a third CNY1trn local government debt swap plan, with close to CNY1trn completed so far, should help to support local government spending. 

"The continued downside risks to growth and the expected large pipeline of local government debt issuance justify further monetary easing. Therefore, in addition to the recent interest rate cut and targeted RRR reduction, one benchmark rate cut of 25bp is expexcted in Q3 and one to two RRR cuts of 50bp each in H2 15, depending on liquidity conditions", says Barclays. 

Meanwhile, the state council this week made an explicit comment that "China will expand the CNY two-way trading range".