China Seen Taking Cautious Stance on Economic Stimulus Despite Pressure to Act

• China expected to take gradual approach to stimulating economy despite recent minor policy changes • Policymakers focused on addressing medium-term debt and structural issues, while preventing economic spiral • Mortgage rate cut seen as too small to boost sentiment; more aggressive easing needed • PBOC risks falling behind the curve; faster action warranted given declining inflation • Must keep real interest rates below economic growth to sustain expansion and reduce debt