Nomura: Beijing Shifts Its Policy Stance Towards Easing

Nomura note that "a raft of meeting memos and policy reports show that Beijing is becoming increasingly concerned about the growth slump and has begun to take action to shift its policy stance in order to prevent growth from sliding further. However, conventional monetary and fiscal easing measures may not effectively boost final demand due to property curbs, waves of COVID-19, the "zero-COVID" strategy, a strong currency, elevated raw material prices and restrictions on local government shadow financing. We expect economic growth to continue weakening until spring 2022; then, and only when the situation becomes bad enough, do we expect Beijing to scrap many of these curbs and restrictions."

• Ultimately, they "expect Beijing to soon significantly step up its monetary easing and fiscal stimulus to counteract the increasing downward pressure. We expect the chance of a RRR cut to rapidly rise in the next couple of months, but we still view the likelihood of a policy rate cut as quite small, due to elevated PPI inflation, rising CPI inflation and the clogged transmission channel."