PBOC expected to cut rates and roll out more stimulus

Bloomberg and staff reporter

China will have a rare briefing on the economy today by three top financial regulators just as it cut one of its short-term policy rates, fueling speculation officials are preparing to ramp up efforts to revive growth.

Authorities yesterday announced that central bank governor Pan Gongsheng will hold a press conference on financial support for economic development, alongside National Financial Regulatory Administration Minister Li Yunze and China Securities Regulatory Commission Chairman Wu Qing.

Also yesterday, the People's Bank of China lowered the 14-day reverse repurchase rate from 1.95 percent to 1.85 percent, catching up with reductions initiated in July.

The cut also came ahead of the weeklong nationwide break that begins October 1.

Taken together, the moves bolster expectations for the PBOC to lower rates, after the US Federal Reserve finally started cutting rates last week, easing pressure on China's need to defend its currency. A slew of disappointing data in August raised concerns that President Xi Jinping's government could miss its annual growth target of around 5 percent without unleashing more support.

Traders appeared to be pricing in more stimulus, with the yield on China's 10-year government bonds falling to a fresh low of 2.03 percent in yesterday's morning session.

The event kicks off at 9am, 20 minutes before the PBOC's daily announcement on its short-term policy loans and their costs, in contrast to more typical 10am start times.

Pan used a similar briefing in January to announce a cut to the amount of money banks must hold in reserve -- the reserve requirement ratio -- two weeks ahead of time, as authorities tried to halt a US$6 trillion (HK$46.8 trillion) stock-market rout.

The central bank chief vowed to "enhance the intensity of monetary policy adjustment" yesterday at an event in Macau, according to a statement posted on the PBOC website. The authority recently signaled it was preparing additional policies.

British advertising mogul Martin Sorrell said China needs to be more aggressive in cutting interest rates to stem the slowdown in the world's second-biggest economy.

Meanwhile, the National Development and Reform Commission said the two schemes to speed up trade-ins of large-scale equipment and consumer goods have gradually worked. With funds totaling 300 billion yuan (HK$331 billion) from treasury bonds allocated, new energy vehicle retail sales climbed 17 percent in August from one month ago.