In the past easing cycles (2008-2009, 2011-2012, 2014-2015), Beijing used the same bailout tool kit which contained subsidies for corporate investment, measures for boosting the property market, subsidies for household spending on durable goods and instructions for the PBoC to pump liquidity and cut interest rates significantly, for the commercial banks to engage in a lending frenzy, and for the SOEs and local governments to borrow and invest in infrastructure. The purpose was to boost growth quantity.
In this easing cycle, which started in July 2018, China has only used selective stimulus in the fiscal, monetary and regulatory fronts. This tactic is also designed to restore private-sector confidence1. Hawkish policy messages that insist on no wholesale reflation have often accompanied the targeted easing measures. This new easing approach shows Beijing’s commitment to prioritising growth quality over quantity via structural
reforms and debt-reduction. Table 1 summarises the policy difference between this and past easing cycles; massive liquidity injection is history (Chart 1).