Comments by Fitch Ratings on China's recent monetary policy decisions
- RRR cuts should be viewed in context of liquidity management steps
- This is to ensure interbank funding conditions are stable in shadow banking crackdown
- Expects regulatory tightening to have more powerful impact on credit growth
- Baseline forecast is China's GDP growth to slow in 2H 2018
- This is due to deceleration in credit growth and softening property market
The most obvious sign of slowing credit growth in China has been the M2 money supply report in which there has been a noticeable decline since 2016. Chinese authorities have been firm to crack down on financial risks and tightening of credit is much expected as a result.
The issue here is that it may hurt economic growth, but so far Chinese authorities don't seem too worried by it. Probably because they have a much bigger headache to deal with in Washington.
