China’s stimulus measures were “bigger guns, but no bazooka,” Barclays says By Investing.com

Investing.com – China’s move to roll out new stimulus measures helped lift investor sentiment, but analysts at Barclays said more support is needed to sustain the rally.

Earlier this week, Beijing unveiled a raft of new policies aimed at supporting China’s struggling economy and ailing housing sector, including lowering interest rates, reducing existing mortgage costs and lowering down payment requirements for all types of housing.

The People’s Bank of China also announced a swap program with an initial value of 500 billion yuan aimed at making it easier for funds, insurance companies and brokers to obtain financing for stock purchases. The People’s Bank of China also said it would provide up to 300 billion yuan in cheap loans to commercial banks in a bid to help them finance share purchases and buybacks by listed companies.

Meanwhile, the reserve requirement ratio, or the amount of cash banks must hold as reserves, was cut by 50 basis points, freeing up about 1 trillion yuan for new lending.

Following the announcement on Tuesday, global stock markets rose as traders assessed whether the measures would be enough to revive the world’s second-largest economy.

In a note to clients, Barclays analysts said the announcements “clearly surprised markets and sent a strong signal, particularly for equities,” although they added that “more needs to be done, particularly on the financial front” to build on the progress made by equity markets.

Analysts noted that the stimulus measures, while comprehensive, fell short of expectations of providing a massive boost in political support.

Among Beijing’s next steps, analysts said the People’s Bank of China could cut reserve requirement ratios by 25 to 50 basis points. The central bank could also consider launching a second or third round of a 500 billion yuan re-lending program, they added.

Analysts also expect the People’s Bank of China to cut interest rates by 10 basis points per quarter between the fourth quarter and the second quarter of 2025.

Meanwhile, investors expect Beijing to continue accelerating the issuance of local government bonds, saying this would boost infrastructure investment.