China's $1.3T market rally casts shadow on PBOC rate cuts

China’s stock market has recently risen by nearly $1.3 ￰0￱ sharp increase in August caught analysts off ￰1￱ of proof of a strong economy, the rally is now seen as the reward of free money and margin ￰2￱ in Beijing are ￰3￱ are haunted by the wreckage of the market crash of 2015, when $6.8 trillion worth of value was wiped ￰4￱ memory of that collapse now informs how regulators treat the current ￰5￱ central bank, the People’s Bank of China (PBOC), was expected to cut another rate and perhaps reduce the reserve requirement ratio (RRR) from banks before the end of the ￰6￱ the rally has complicated that outlook. “Liquidity could be the primary factor driving the ongoing rally of China equities,” said Yu Xiangrong, head of Greater China economics at Citi.

“There is no need to fuel the rally further at this stage.” Regulators move to contain risks The PBOC and market regulators aren’t being idle ￰7￱ indicate they are also looking to make rules on margin financing stricter, a business that reached a record 2.3 trillion yuan, or $322 billion, this ￰8￱ of the major factors leading to volatility has been heavy use of ￰9￱ possible steps involve changing short-selling limits and tightening controls over speculative ￰10￱ goal is to keep the market steady, without inciting ￰11￱ rally, however, has not been evenly ￰12￱ buying is from state-backed funds and large institutions, not retail ￰13￱ contrasts with 2015, when individual investors flocked to stocks, exacerbating the ￰14￱ central bank finds itself in a policy ￰15￱ one hand, it is an economy slowing ￰16￱ faces a new trade war with the U.

S., weakened confidence in the property sector, and feeble consumer ￰17￱ figures have disappointed, ￰18￱ the other hand, if rates are cut or liquidity is pumped in further now, there is a risk that assets will become even more overpriced than they already ￰19￱ warn that if the rally fades, it could blow household wealth while undermining Beijing’s efforts to encourage confidence in equities as a long-term investment ￰20￱ Wrigley, chief China economist at Pantheon Macroeconomics, said the rally in equities would likely strengthen policymakers’ resolve to avoid broad-based monetary ￰21￱ watch for delayed easing Global banks such as Citigroup and Nomura have adjusted their ￰22￱ than a September shift, they’re now expecting the PBOC to hold off until later this year- at this point, easing would probably be more modest than the aggressive easing that wa s pr iced ￰23￱ Economics noted that while weakness in the economy supported the case for further monetary easing, the surge in equities meant the PBOC would likely be cautious about injecting more ￰24￱ had previously forecast as much as 40 basis points of cuts over 2025, which would be the biggest easing cycle for the past ￰25￱ likelihood now is for a 10 bp cut and, at best, a 50bp RRR cut by the end of the year.

Instead, the government is moving toward a mix of fiscal measures, infrastructure spending, and tax cuts, rather than an all-out pursuit of monetary ￰26￱ adjustment would provide growth without inflating more risky asset ￰27￱ it is a delicate balancing ￰28￱ the equity market soars even higher unchecked, Beijing may be more inclined to cap ￰29￱ if growth signals evaporate, the central bank may be forced to act again, perhaps as soon as this summer, even as it risks inflating ￰30￱ up to $30,050 in trading rewards when you join Bybit today