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SocGen lowers China GDP forecast and looks for more easing

  • Worsening Covid-19 outbreaks "combined with China's zero-tolerance approach, means serious chances of recurring local outbreaks and severe mobility restrictions" as well as risks of "broadening regulatory tightening on the tech sector" have led SocGen to lower its Q3 GDP forecast "from 6.2% to 5.5% and for the full year from 8.5% to 8%."
  • SocGen then notes that "More policy easing looks warranted, so we now expect a 10bp policy rate cut (to the reverse repo and MLF rates) on top of the 50bp RRR cut already pencilled in before year-end."
  • "But that would not be enough to stabilise growth quickly, certainly not until policymakers meaningfully ease back on deleveraging policy, and there are very few signs of this. Given the lack of desirable options, a consumption and/or green stimulus looks increasingly likely."

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