CHINA’S monetary policymakers are in an “observation period” after the economy showed a strong start to 2024, according to state media, a signal that the central bank will not adjust rates in the coming months.

The People’s Bank of China (PBOC) is not expected to cut banks’ reserve requirement ratio or interest rates in the second quarter, Citic Securities analyst Ming Ming told the state-run Shanghai Securities News. Encouraging economic data and low expectations for the US Federal Reserve to cut rates soon were both factors cited in the Thursday (Mar 21) report.

China’s central bank held a key policy rate in March while Chinese lenders maintained their benchmark loan rates. That signalled monetary policy is “staying put” as authorities take time to observe where the economy will be heading, according to the report.

Economic data released this week blew past expectations for the industrial side of China’s economy in the first two months of the year, giving policymakers a boost after ramping up support. The PBOC cut the reserve requirement ratio last month while Chinese lenders slashed a key mortgage reference rate by the most on record.

A separate report cited the pressure on banks as another reason to hold off further easing. Squeezed profit margins are a restraining factor, the PBOC-affiliated Financial News reported, citing experts.

The reports will add to concerns among economists that the overall positive initial economic numbers for 2024 may delay top leaders from moving decisively to lend more policy support for the economy. Analysts cautioned earlier this week that the troubled property sector and weak domestic demand remain major drags that need support if China is to meet its around 5 per cent growth target in 2024.

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“We believe the economy has yet to bottom out, the property sector faces even bigger challenges, the risk of another fiscal cliff this year is on the rise, activity data might slow over the next few months,” economists at Nomura Holdings wrote in a Monday note. “Now is not the time for complacency.”

Officials from the PBOC, the Ministry of Finance, and the National Development and Reform Commission, the country’s top economic planning agency, will meet the press on Thursday morning to discuss the economic data and policies. BLOOMBERG