DoubleLine.com Posts Paper Forecasting Resumption by China of Economic Stimulus in New Year

LOS ANGELES, Dec. 14, 2021

To read the paper, titled "Beijing to Embark on New Round of Stimulus in 2022," please visit this landing page: https://doubleline.com/wp-content/uploads/Campbell-on-Beijing-Stimulus_December-2021.pdf

"However, internal politics rather than international considerations will dictate the timing of China's resumption of stimulus," Mr. Campbell writes. "Beijing will attempt to sequence and calibrate fiscal and monetary policy to the economic upside to culminate shortly before or by the opening of the 20th National Congress of the Chinese Communist Party next October. At this event, China President Xi Jinping is expected to be appointed to an unprecedented third term – in modern China, leaders have not served longer than two five-year terms."

In fact, Mr. Campbell argues that "Beijing has already started to thaw its icy policy stance. The People's Bank of China reduced the required reserve ratio for banks by 0.5%, effective on December 15, 2021. The reduction of this ratio had the impact of increasing liquidity by an estimated 1.2 trillion Chinese yuan (equivalent to $188 billion in U.S. dollar terms). To be sure, Chinese authorities will try to prevent excessive speculation, and the trajectory of regulation will remain on a tighter path than we have seen in previous years. That said, loosening China's overly tight stance today and an increase in the credit impulse will benefit the Chinese economy and by extension the global economy in mid-2022."

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