PBoC confident China will achieve the near 5% growth target set at Party Congress

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Link Securities| In a speech to a symposium in Shanghai this week, People’s Bank of China (PBoC) Governor Yi Gang was upbeat about China’s economic outlook, suggesting that 2Q23 GDP growth will be relatively high, mainly due to a favourable base effect. He further rationalised the recent weakness in inflation as a reflection of the lagged pick-up in demand, and expects the consumer price index (CPI) to rise gradually in 2H2023 and end December above 1%.

Overall, Yi Gang expressed his confidence in achieving the economic targets set at the National Party Congress (NPC), with a growth target of close to 5%. The governor also focused on the commitment to strengthen counter-cyclical adjustments, taken as signs of easing.

The Daily Securities, meanwhile, discussed economists’ expectations that the PBoC could cut the medium-term interest rate (MLF) by 5-10 basis points as early as this week next Thursday, which could presage similar falls in the overall lending rate (LPR). In addition, the paper noted that there is room for a cut in reserve requirement ratios (RRR) in 3Q23 to bolster liquidity.

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