Kicking off the new year with PBOC cuts. What do you make of the timing and is this just the beginning of stimulus?
Yvonne Man
Ding Shuang
There is room to cut the policy rate, but the room is not that large and it will be used very sparingly, focusing on its secondary effect.
Ding Shuang
Room for policy rate cut is constrained by net interest margin at 1.4% (record low). PBOC said they will try to keep financing cost at low levels instead of continuing to lead it lower.
Ding Shuang
We think all things considered, there is room to cut the policy rate in the second quarter by 10 basis points. That's our forecast.
What does it mean for the currency and policy around the currency? They pushed back, saying recent strength was due to dollar weakness.
David Glass
Ding Shuang
The PBOC appears more receptive to a gradual appreciation of the currency.
Ding Shuang
China's export grew 5.5% last year despite high tariffs. Trade surplus $1.2 trillion record high. Current account surplus estimate 3.3% of GDP, highest in 15 years, trend likely to continue.
Ding Shuang
China's strong RMB policy is taking shape as China tries to develop a financially strong nation. President Xi said a strong currency is the first core element of a financial strong nation.
You mentioned cuts are targeted towards tech, but investment is still weak, consumption weak, property market risks. Where does that leave growth for 2026? Are we in for a deeper slowdown?
Yvonne Man
Ding Shuang
Export will continue to be a positive contribution to growth. As indicated in the Central Economic Conference, they want to stop the decline of investment. That's very important.
Ding Shuang
We think investment is likely to turn around this year, supported by other measures to support consumption.
Part of the calculation for private companies on investment and CapEx is where inflation goes. What are your expectations on price levels this year?
David Glass
Ding Shuang
Definitely the policy tone has changed. They want to see a moderate rise of the price level.
Ding Shuang
Our expectation is moderate rise of price. We forecast average CPI at 0.6% higher than 0 last year in 2025.
Ding Shuang
Low inflation is likely to continue and that is actually another reason why China's products are getting more competitive globally.