Economists now see China’s central bank keeping its main interest rate on hold until the fourth quarter, when policy makers will lower it to help safeguard a stabilizing expansion.
The People’s Bank of China will hold its benchmark one-year lending rate at a record low of 4.35percent through the third quarter before cutting it to 4.1 percent in the fourth quarter, economists said in an April 15-20 survey by Bloomberg. That compares with projections in the March survey for a reduction to 4.1 percent in the second quarter and another decrease to 3.85 percent in the fourth quarter.
"Monetary policy has already done its job after last year’s intensive easing," said Harrison Hu, chief Greater China economist at Royal Bank of Scotland Plc in Singapore, who now expects rates on hold all year versus earlier predicting a second-quarter cut. "The central bank needs to save the bullets for more difficult times ahead. Fiscal policy should take over and play a larger role this year in buttressing the real economy."
Billionaire investor George Soros said China’s debt-fueled economy resembles the U.S. in 2007-08, before credit markets seized up and spurred a global recession.
China’s March credit-growth figures should be viewed as a warning sign, Soros said at an Asia Society event in New York on Wednesday. The broadest measure of new credit in the world’s second-biggest economy was 2.34 trillion yuan ($362 billion) last month, far exceeding the median forecast of 1.4 trillion yuan in a Bloomberg survey and signaling the government is prioritizing growth over reining in debt.
What’s happening in China "eerily resembles what happened during the financial crisis in the U.S. in 2007-08, which was similarly fueled by credit growth," Soros said. "Most of money that banks are supplying is needed to keep bad debts and loss-making enterprises alive."
Crude prices rose on Thursday, reversing earlier declines, as the International Energy Agency (IEA) said that 2016 would see the biggest fall in non-OPEC production in a generation, helping rebalance a market that has been dogged
The IEA's chief Fatih Birol said on Thursday that low oil prices had cut investment by about 40 percent in the past two years, with sharp falls in the United States, Canada, Latin America and Russia.
"This year, we are expecting the biggest decline in non-OPEC oil supply in the last 25 years, almost 700,000 barrels per day. At the same time, global demand growth is in a hectic pace, led by India, China and other emerging countries," he told reporters in Tokyo.
U.S. crude futures dipped to $43.62 before rising to $44.37 a barrel, up 19 cents from their last close.
Saudi Arabia is raising $10bn from a consortium of global banks as the kingdom embarks on its first international debt issuance in 25 years to counter dwindling oil revenues and reserves.
The landmark five-year loan, a signal of Riyadh's newfound dependence on foreign capital, opens the way for Saudi to launch its first international bond issue. It comes as the sustained slump in crude encourages other Gulf governments, such as Abu Dhabi, Qatar and Oman, to tap international bond markets.
Reference: Bloomberg, Reuters, WSJ
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