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China Econometer – January 2019
Monday, 25 February 2019 09:46

Reserve Requirements Cut to Reduce Further Risk of Economic Decline
The People’s Bank of China cut the reserve requirement ratio by 1% at the start of 2019, the fifth time it has done so over the past year. This move was prompted by the decline in growth of the Chinese economy, slowing for the first time in 2018 since the global financial crisis. Reserve requirements were at 14.5 percent for large banks, and 12.5 for smaller banks, with the new changes being implemented in 2 equal stages on January 15 and January 25. Further cuts are expected, as the ongoing trade negotiations with the US awaiting the March 1st deadline are still affecting the confidence in the Chinese economy. China has set their GDP growth target to between 6-6.5 percent for 2019, as 2018 is expected to have only seen a growth of 6.6 percent.

Key Economic Indicators
The producer price index (PPI) rose 0.9 percent in December y-o-y, which was lower than economists’ expectations of 1.6 percent. The consumer price index (CPI) rose 1.9 percent in December, lower than the expected 2.1 percent, and also lower than November’s 2.2 percent.

Manufacturing Sector Contracts in December
China’s official manufacturing purchasing manager’s index (PMI) experienced its first contraction in over 2 years, as the index rating fell to 49.4, from a rating of 50.0 in November. Weak international demand, coupled with increasing domestic pressure was expected to be the cause of this contraction, meaning further support measures from Chinese government is expected to stimulate growth in this sector. Tax cuts and ensuring liquidity remains ample were measures pledged by Chinese leadership in December, as trade talks with US continue to affect the world’s second largest economy.

First Talks Occur Ahead of Truce Deadline
The global economy is closely watching the trade talks occurring between Beijing and Washington, as the first series of talks ahead of the March 1st truce deadline occurred between 7 and 9 January. The talks were originally planned to be a 2-day discussion, however it was continued on the 9th, a promising sign that an agreement between the countries is coming forward. Chinese Vice-Premier Liu He attended the Vice-Ministerial meeting held in Beijing, with the US delegation being led by Deputy US Trade Representative, Jeffrey Gerrish.

This article is produced by The Beijing Axis and is published in The Econometer section of ChinAfrica magazine (February 2019), an English and French language monthly publication that provides news, views and analysis on all things China, Africa and China-Africa relations.