CHINA is expected to release more cash into the banking system this year in a bid to boost stimulus and reach an ambitious growth target of around 5 per cent – a figure analysts still see as elusive.

The People’s Bank of China (PBOC) is projected to deliver two more cuts this year to the amount of money banks have to keep in reserve, according to the median estimate in Bloomberg’s monthly survey of economists. The reductions are seen totalling 50 basis points and happening in the back half of 2024. An earlier poll after February’s reserve requirement ratio (RRR) cut projected just one more trim in the third quarter.

The updated projection comes as policymakers in recent weeks have signalled additional support for the world’s second-largest economy: The PBOC has twice this month said there is room to lower the RRR, an important tool for adjusting liquidity. That is implied more monetary stimulus remains in the cards as authorities outline other ways to lift growth through fiscal means, such as by selling more central debt.

“The question remains whether the additional fiscal stimulus announced by Beijing will be sufficient, in particular, to shift sentiment in the private sector and break the negative feedback loop in real estate,” said Arjen van Dijkhuizen, a senior economist at ABN Amro Bank. He said property is “still the biggest drag to growth.”

Challenges facing the economy are rife, despite activity having been better than expected at the start of 2024. Economists see gross domestic product expanding by 4.6 per cent this year, according to the survey – unchanged from the prior result, and below Beijing’s goal.

Factory output and investment have gained momentum as foreign demand improves and existing stimulus takes effect, but the rebound in consumption remains uncertain. The property slump and a gloomy job outlook have weighed on confidence and prices.

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While PBOC governor Pan Gongsheng and other officials have pointed to room for a decline in the RRR, the scope to adjust monetary policy through other means such as by lowering policy interest rates is still restricted. Profit margins at Chinese banks are thin, and there’s little clarity yet on when exactly the US Federal Reserve will start easing policy.

The central bank is likely to cut the rate on its medium-term lending facility in the second and third quarters, according to the Bloomberg survey, the same as the last poll.

Fiscal measures are expected to play a main role in bolstering the economy this year: Beijing has unveiled a slightly stronger budget package than in previous years. But economists say more policy support is needed – especially for driving domestic consumption.

“It will be challenging to repeat the performance of January and February,” said Erica Tay, an economist at Maybank Investment Banking Group. “While manufacturing activity will be helped by healthy export orders, domestic consumption will continue to come under pressure.”

Off the back of the data from the first two months of the year, economists now expect industrial output to grow 4.9 per cent in 2024 from the prior year, up from an earlier projection of 4.5 per cent. Exports are seen expanding 3 per cent, more than the last forecast of 2.5 per cent. Analysts also revised upward estimates for growth in fixed-asset investment.

Economists downgraded some projections for data related to domestic demand, though. Imports are seen growing 2.6 per cent this year, slightly lower than an earlier forecast. Consumer prices are expected to increase 0.8 per cent for the full year, down a tad from the last estimate of 0.9 per cent.

Other key highlights from the survey:

• Economists see fixed-asset investment rising 4.6 per cent this year, up from 4.5 per cent in the prior survey.

• The surveyed urban unemployment rate is seen at 5.2 per cent for this year, compared with 5.1 per cent previously.

• The five-year loan prime rate – a reference for mortgage rates – is expected to be trimmed from the second quarter by a total of 20 basis points to 3.75 per cent through the end of the year.

• The one-year LPR is seen declining by 10 basis points in the second and fourth quarters, respectively. BLOOMBERG