A research office at China’s top economic planner has called for the central bank to cut interest rates and bank reserve requirements “at the appropriate time,” in rare comments on monetary policy by the agency.
In a statement published on its website on Wednesday, the National Development and Reform Commission (NDRC) also said it would lower costs for firms, encourage private enterprises to raise capital by issuing bonds, and push cities to further cut oversupply in their housing markets.
The comments on monetary policy, which said China needed “to find the appropriate time to further cut interest rates and RRR,” highlight the risks the planning agency sees to economic growth.
The NDRC, generally associated with China’s economic conservatives, is responsible for regulating prices, guiding state investment and otherwise operating the most planned parts of the economy. It generally does not express public views on central bank policy.
The People’s Bank of China (PBOC), meanwhile, has said in the past it will maintain a “prudent” monetary policy with a slight easing bias, leaving the door open for more cuts, although it has not adjusted interest rates since October 2015.
Investors have been watching China’s bureaucracy for signs of policy dissent since May, when the People’s Daily quoted an “authoritative person” warning of a financial crisis if the government relied too much on debt-fueled stimulus.
That caused markets to sell off briefly as investors worried the easing cycle was coming to a premature end and average lending rates rose.
One government official said he saw the report as a way for the NDRC to exert pressure on the central bank.
“The NDRC is always in favor of cutting rates because it is charged with keeping growth steady, while the central bank is always emphasizing deleveraging, so it is more inclined to cut reserve requirements than interest rates,” said the official speaking on condition of anonymity.
The NDRC statement came from a research unit of the agency, not its key policymakers. Although unusual, it had little effect on domestic markets. China’s stock indexes, which tend to respond positively to signals of policy easing, rose only slightly after the announcement.
“Every ministry has this kind of policy support unit – they can say anything … This shows that the NDRC as a macroeconomic management department, they see that the economy faces downward pressure,” said Zhou Hao, economist at Commerzbank in Singapore.