HSBC Forecasts Two 50BP Reserve Ratio Cuts from PBOC over Next Several Months


The chief economist for HSBC in Greater China expects the Chinese central bank to push through two more cuts to the reserve requirement ratio over the next few months, as GDP growth wanes amidst the ongoing turmoil created by the COVID-19 pandemic.

Qu Hongbin (屈宏斌) said that the People’s Bank of China (PBOC) will adopt a range of loosening measures in order to prop up GDP growth in 2022.

“In 2021 full year GDP growth hit 8.1%, but the two-year average growth rate was only 5.1%,” wrote Qu in an opinion piece for Caijing.

“Given that the official estimate of potential economic growth is around 5.0 – 6.0%, this figure is already close to the lower bound for growth, and measures to stabilise growth have already been unveiled and will continue to intensify.

“On 17 January PBOC reduced the rate for medium-term lending facilities (MLF) by 10 basis points, and undertook 700 billion in MLF operations and 100 billion yuan in open market reverse repo operations, which will continue to translate into a 10 basis point reduction in the one-year loan prime rate.”

“Over the next several months I anticipate monetary loosening, including the possible unveiling of two more comprehensive reserve ratio cuts of 50 basis points each, as well as more fiscal loosening measures such as tax and fee reductions, in order to help stabilise economic growth.”