BEIJING (Reuters) - China should cut interest rates soon to avoid volatile economic growth and build confidence, the official China Securities Journal said in a front-page editorial on Wednesday.
The paper said it was necessary to take more steps to shore up China’s economy, but that a massive injection of stimulus on the scale of the 4 trillion yuan ($635 billion) program launched in 2009 was unlikely.
“In order to avoid a widening fluctuation of economic growth it is now necessary to cut interest rates,” the article said.
The paper said conditions were perfect for a cut in interest rates as inflation had eased and was expected to cool further in May, producer prices were in a downward trend and other emerging markets had also been easing monetary policy.
A Reuters poll on Tuesday showed that Chinese inflation is expected to have eased to 3.2 percent year on year in May, while factory output growth is likely to have been 9.9 percent, not far from three-year lows.
“If the economic indicators in May continue to show moderating or even decelerating growth, it is possible that economic growth in the second quarter of the year will be under 7.5 percent and the economy will be far from bottoming out,” the paper said.
While the editorial appeared in a newspaper run by China’s official Xinhua news agency, it is unclear if its recommendations are in line with Beijing’s policy preference.
A raft of weak economic numbers would feed market speculation that China is about to open its purse again to pay for another growth-boosting fiscal stimulus package.
Official and HSBC PMI surveys last week signaled a deeper-than-forecast deterioration in demand at home and abroad, underlining recent official concerns that growth is slowing down.
The official purchasing managers’ index - covering China’s biggest, mainly state-backed manufacturers - fell more than expected to 50.4 in May. It was the weakest reading this year and down from April’s 13-month high, with output at its lowest since November 2011.
But many analysts say such talk is unfounded and more wishful investor thinking than prescience, especially since China is still trying to unravel a debt mess left by the 2008/09 pump priming.
Reporting By Xiaoyi Shao and Nick Edwards; Editing by Ron Popeski