The People's Bank of China (PBoC) isn't known for embracing global trends, but it's now widely expected to follow the easing footsteps of its international peers after a raft of dismal data.
Twin purchasing managers' index (PMI) surveys for January released in the past 48 hours showed contractions in China's factory activity. The government's official PMI stood at 49.8, a more than two-year low, while HSBC's private survey came in at 49.7, its second month below the 50 level that separates expansion from contraction. Other data over the weekend showed growth in the services sector dropped to a one-year low in January.
"We think the PMIs opened the window for a broad 50 basis-point RRR (reserve ratio requirement) cut in the first quarter," said economists at Citi in a recent report, adding that the last round of country-wide RRR cuts was triggered by a below-50 PMI reading in late 2011.
Analysts at Mizuho Bank agreed: "With the Chinese economy facing headwinds from weaker European demand and disinflation, we see rising pressure for more stimulus measures, such as liquidity injections, interest rate cuts or RRR cuts," the bank said in a note on Monday.