As growth flags, China shies from stimulus
HONG KONG — As evidence has mounted that the Chinese economy is slowing, Beijing has kept the world on tenterhooks, delivering none of the big, headline-grabbing economic stimulus measures many analysts have predicted.
Two months have passed since the last interest rate cut, and it looks increasingly as if the Chinese government is biding its time, avoiding measures that could reignite another investment binge of the sort that sent prices for property and other assets soaring in 2009 and 2010.
The authorities are taking “a very reactionary, cautious approach,” said Wang Tao, China economist at UBS. “They do not want to repeat the excesses of last time.”
The latest sign of China’s flagging economic health came Saturday in the form of an official manufacturing-sector survey. This slumped more than expected, to 49.2 in August, falling below the level of 50 that separates expansion from contraction for the first time since late 2011.
A similar survey, which is published by HSBC and is more focused on smaller and medium-size enterprises, registered a similar deterioration. The final reading, released Monday, came in at 47.6, down from 49.3 in July.
In the eurozone, manufacturing contracted more than initially estimated in August, suggesting that the economy might struggle to avoid a recession in the third quarter, Bloomberg reported.
A gauge of manufacturing in the euro area based on a survey of purchasing managers was revised lower, to 45.1, from the reading of 45.3 estimated earlier, Markit Economics said Monday.
The index, which stood at 44 in July, has held for 13 months below 50.
Many analysts took the indicators for China as a signal that policymakers would soon announce another cut in the reserve requirement ratio for banks, a step that would free up more cash for them to lend.
Some say Beijing may also cut rates to reinject momentum into an economy that has been battered by falling exports and a slowing domestic property market.
The authorities have not been sitting entirely idle in recent months. Project approvals have been accelerated, for example. However, more than eight weeks have passed since the last rate cut, while the reserve ratio requirement was last lowered in May.
Increasingly, analysts think Beijing is playing for time before it resorts to more sweeping policy tools again.