China’s State Planner Urges Central Bank Easing at ‘Appropriate Time’ – Reuters

BEIJING (Reuters) – A research division of China’s leading economic planner has urged the central bank to consider reducing interest rates and bank reserve requirements "at the appropriate time." This marks a rare instance of the agency commenting on monetary policy.

In a statement released on Wednesday, the National Development and Reform Commission (NDRC) also indicated plans to lower operational costs for companies, promote private firms to raise funds through bond issuance, and encourage cities to address oversupply issues in their housing markets.

These remarks suggest that the NDRC perceives significant risks to economic growth, emphasizing the need for China to "find the appropriate time to further cut interest rates and RRR" (reserve requirement ratio).

Typically associated with more conservative economic policies, the NDRC is tasked with regulating prices, directing state investments, and managing various aspects of the economy. Historically, it refrains from publicly commenting on central bank practices.

The People’s Bank of China (PBOC) has previously stated its intention to maintain a "prudent" monetary policy, while gradually easing restrictions; however, it has not altered interest rates since October 2015.

Investors have been closely monitoring China’s bureaucratic landscape for hints of policy discrepancies since May, following a warning from an "authoritative person" cited by the People’s Daily about a potential financial crisis if the government overly relies on debt-driven stimulus measures. This remark briefly spooked the markets, raising concerns that the easing cycle could end prematurely.

One government official interpreted the NDRC’s report as an attempt to apply pressure on the central bank. "The NDRC usually advocates for rate cuts to sustain growth, while the central bank focuses on deleveraging," said the official, who requested anonymity.

MILD REACTION

The NDRC’s statement originated from a research unit rather than top policymakers. While this is unusual, it had a minimal impact on domestic markets. Following the announcement, China’s stock indexes, which typically respond well to signs of easing, saw only slight increases.

Zhou Hao, an economist at Commerzbank in Singapore, noted, "Every ministry has such policy support units – they can express any opinion. This indicates that the NDRC, as a body overseeing macroeconomic management, recognizes the downward pressure on the economy."