The sudden loosing of the tight banking rules for lending came as a surprise, but economic analyst Arthur Kroeber sees no reason for panic about China’s economy. In the Guardian he gives a historical perspective.
In another sign that the world economy is taking a turn for the worse, analyst Arthur Kroeber of Beijing-based GaveKal-Dragonomics said the cut [ in the reserve ratio requirement (RRR) ]was a formal indication of the government’s shift after two important hints. Vice premier Wang Qishan recently remarked that an unbalanced recovery was preferable to a balanced recession.
He noted that adjustments to the RRR were usually made in response to foreign exchange inflows, which have slowed sharply, rather than to control domestic monetary conditions.
Despite the shift in policy, Kroeber challenged growing pessimism in the markets about China’s prospects. “[People are saying] Oh, suddenly there are capital outflows, the trade surplus is going down, growth is slowing – isn’t this terrible? My answer is no, it’s not.
“Going back three or four years, everyone said China was growing too fast, capital inflows were way too much and the trade surplus was way too big… We are getting the adjustment everyone thought was necessary.”
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