Posted 12/11/2023, 10:03:16 AM
China Faces Threat of Economic Slowdown As Borrowing Costs Stay High
- China's real borrowing costs expected to stay high in 2024, posing threat to economic growth
- Real interest rates topped 4% and may be near 5%, highest since 2016, due to faster price falls than loan rates
- High real rates keep company borrowing costs high and make consumers more likely to save than spend
- Limited ability for policymakers to cut rates due to focus on fiscal stimulus, need to avoid debt, yuan uncertainty
- Proactive fiscal and monetary policies needed to counter deflation and drive reflation, but cuts likely small