Barclays slashed their China GDP forecast to 4.5% (prior 4.9%)

Barclays revised its projection for Chinese economic growth for this year to 4.5%, from 4.9%.

• For 2024 analysts at the bank project 4% GDP growth
• For the current quarter, Q3 2023, Barclays expects GDP at 3.5%

As for the People's Bank of China, the analysts expect an RRR cut of 25bp in the weeks ahead.

Earlier:

• Morgan Stanley cuts China 2023 GDP growth forecast to 4.7% (from 5.0%)

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The RRR is a policy tool the People's Bank of China has.

• The Reserve Requirement Ratio (RRR) is a central bank regulation that sets the minimum amount of reserves each bank must hold in relation to their deposit liabilities.
• Its the percentage of total deposits that banks are legally required to keep on hand, either as cash in their vaults or in a reserve account at the central bank.

By adjusting the RRR, the PBOC can influence the lending capacity of commercial banks.

• For example, an increase in RRR means that banks have less money to lend out because they have to keep more in reserve. This reduces the money supply in the economy. Conversely, if the PBOC decreases the reserve ratio, banks have more money to lend because they are required to keep less in reserve. This increases the money supply in the economy, which can stimulate economic activity.