China Ahead of Q2 GDP Announcement... Hot Money Concerns and Additional Emergency Stimulus 'Unlikely'

China National Bureau of Statistics to Announce Q2 GDP on 16th... Positive Turn Expected

[Asia Economy Reporter Park Sun-mi] As China is scheduled to announce key economic indicators including the second-quarter Gross Domestic Product (GDP) on the 16th, the likelihood of additional emergency stimulus measures is gaining weight as low.

According to CNBC on the 13th, the People's Bank of China indicated at a regular briefing with reporters on the 10th that additional emergency stimulus measures are not necessary.

Guo Kai, Deputy Director of the Monetary Policy Department at the People's Bank of China, said, "We need to understand that lowering interest rates appropriately does not mean the lower, the better," adding, "If interest rates fall too much, it will cause capital to flow to places where it should not." He also said, "There have been policies and measures in response to the recent COVID-19 outbreak. The economy will return to normal in the second half of the year."

Wang Xin, Director of the Research Bureau at the People's Bank of China, also said at the same briefing, "There needs to be a high level of vigilance against large-scale short-term capital inflows," expressing concern that "central banks of major advanced countries such as Europe and the United States have implemented very strong monetary policies, resulting in large-scale short-term capital inflows worldwide."

These remarks by senior officials of the People's Bank of China are interpreted as expressing caution against the recent expectations that the Chinese government will ease monetary policy and implement active stimulus measures to revive the economy, which are leading to short-term inflows of investment capital.

The cumulative amount of new yuan loans from January to June this year reached 12.09 trillion yuan, setting a record high. Also, last week, the Chinese mainland stock market surged more than 7% amid active foreign capital inflows.

Lu Ting, an economist at Nomura Securities, said, "Since the economy has not fully recovered and uncertainties remain, the People's Bank of China will continue its monetary easing stance for the rest of the year. However, considering the recent stock market rally, some previously planned monetary easing measures, especially cuts in the bank reserve requirement ratio and reductions in the Medium-term Lending Facility (MLF) rate, may be postponed," adding, "Currently, the probability of China lowering the benchmark interest rate is close to zero."

Meanwhile, the National Bureau of Statistics of China is scheduled to announce a series of economic indicators including the second-quarter GDP on the 16th. Experts are considering the possibility that the real GDP growth rate, which recorded a historic low of -6.8% in the first quarter due to the impact of COVID-19, may turn positive. At the end of last month, a Bloomberg survey showed that the average forecast for second-quarter GDP growth was 1.5%.

However, the Wall Street Journal (WSJ) diagnosed that even if the Chinese economy recovers, China's ability to drive the global economy will be weaker than during the 2008-2009 global financial crisis. It also noted that the Chinese government is refraining from stimulus due to concerns about various side effects and that, due to strengthened needs for industrial self-sufficiency, China is unlikely to make large-scale overseas purchases in various sectors as it did in the past.

This content was produced with the assistance of AI translation services.