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IS CHINA DOING ENOUGH TO STIMULATE ECONOMIC GROWTH?

China's series of economic stimulus which Beijing hopes would help revive the country's flagging economy may be showing signs of success.


In its latest move, the People's Bank of China (PBOC) announced on Wednesday a reduction in the amount of cash banks have to keep in reserve. 


The latest PBC changes to the reserve requirement for financial institutions has buoyed the markets in China. The Shanghai Composite climbed almost 1.3 per cent during the first trading day of 2020, while the Hang Seng Index in Hong Kong jumped by 1 per cent.


The PBC stimulus, which follows the $126 billion stimulus last September, will come into effect on 6 January 2020 and could potentially pump about 800 billion yuan or $115 billion into circulation, by easing access to long-term lending thereby supporting economic growth.


China's struggling manufacturing sector has consequently seen some modest recovery, recording growth in December, although the growth was at a slower rate than in November. It is important to the global economy that the world's second-largest economy is responding to the stimulus. However, there is concern that the action taken by Chinese policy and decision-makers may not have been bold enough given the size of the Chinese economy. 


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