PBoC likely to continue usual easing

PBoC started easing monetary policy one year back and fiscal policy easing 6 months back. The credit growth started to accelerate in middle of the year. Nevertheless, signs of recovery are still awaited.

Net amount of policy easing is far from aggressive, however the lengthy policy lag indicates the diminishing effectiveness of traditional policy easing framework.

"China did not face the restriction of "zero interest rates" as faced by, say, the European Central Bank, because its nominal interest rates remained above zero, while its deposit reserve ratio was also still relatively high. As such, China has the flexibility to use of conventional monetary policies", stated PBoC in a meeting.

Policy makers might think that they do not have to change the paradigm, by taking comfort in the resilience of consumption and services.

"Therefore, we expect the easing trajectory to continue via more bank loans, more public investment and more liquidity support from the PBoC. Charges in strategy, if any, are unlikely to come before the National People's Congress next year", says Societe Generale in a research note.