MNI SOURCE: Expect More RRR Cuts, M2 Rebound 9%: PBOC Source

--China Politburo Meeting Signals Further Easing

     BEIJING (MNI) - China's latest Politburo meeting emphasized the importance

of stable economic growth, putting maintained economic growth higher up the

agenda and hinting at more easing policies, a source close to the People's Bank

of China told MNI.

     "Although the policymaker has not addressed the change directly, there are

already signs," the PBOC official said. 

     "So we would see more RRR (reserve requirement ratio) cut and M2 growth is

expected to rebound above 9% this year," he added.

     Monday's Politburo meeting stressed that meeting the annual target "will

require painstaking efforts", in sharp contrast to Premier Li's press conference

during National People's Congress Session a month ago stating the government are

very confident about meeting the annual growth target.

     --TRADE CONCERNS

     Part of the reason for increased government caution over economic growth

prospects is the escalating trade spat with the U.S. The meeting noted that "the

world economic and political situation has become more complex", the first time

the Politburo gathering has mentioned the global outlook since the height of the

Eurozone debt crisis in 2012.

     To cope with rising concerns over external uncertainties and increased

pressures on domestic economic growth, the Meeting reiterated for the first time

since 2015 the importance of increasing domestic demand.

     The Politburo again emphasized the continuing campaign to prevent and solve

major risks, take targeted measures to help people lift themselves out of

poverty and pollution prevention and treatment.

     Moreover, the Meeting said the government needed to "lower corporate

funding costs", a rare mention in Politburo meetings, with the last time

December 2015 and it was quickly followed by an easing of the monetary policy

stance afterwards.

     --GROWTH FOCUS

     The meeting said the government will "advance the healthy development of

credit growth, stock market, bond market, FX market and property market,"

monitoring developments to eliminate potential risks. 

     The Politburo meeting, alongside last week's RRR cut, conveys a signal that

central government has become more focused on maintaining economic growth,

rather than financial deleveraging at the moment. How government will expand

domestic demand while adjusting the economic growth structure need to be closely

watched. 

     Increasing domestic demand often referred to boosting property investment

and more infrastructure investment. However, this time around, due to concerns

over financial risk and the deleveraging moves, the focus will likely be on

encouraging domestic consumption. 

     While too rapid a rise in household sector leverage is also a concern for

regulators, how the government will strike a balance between short-term gain and

long-term risk remains to be seen.

--MNI Beijing Bureau; +86 10 85325998; email: he.wei@marketnews.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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