China's economy has been slowing for some time, battling a weak external environment, sluggish domestic demand and a slowing property sector. That's spurred concern about the potential for bad debts to pile up as well as concerns Asia's growth engine might sputter.
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In 2014, the mainland economy expanded at its slowest full-year pace in 24 years, growing 7.4 percent, the slowest rate since 1990, and undershooting the government's target for the first time since 1998. The economy continued to lose momentum in the first quarter of 2015, growing 7 percent on-year, the slowest pace since the first quarter of 2009, during the height of the financial crisis.
The PBOC has undertaken easing measures to prevent the economy from slowing further. Most recently, the central bank cut the reserve requirement ratio (RRR) for banks by 100 basis points on April 19 to stimulate lending – the second RRR cut in as many months.
Daiwa Securities' Saito expects another 50 basis points worth of cuts to the RRR in May or June; he expects the ratio could be cut by as much as an additional three percentage points this year.
"Chinese macroeconomic policies will become more accommodative this year as evidence of economic weakness accumulates," Bill Adams, senior international economist at PNC Financial Services, said in a note. "Growth in China likely hasn't bottomed out yet."
Some are more optimistic about the PMI data.
"The continued expansion of the official PMI suggests that the growth momentum is picking up, though modestly, thanks to the rise of newly started projects and monetary policy easing," economists at ANZ said in a note. But while ANZ forecasts an investment-cycle pick up in the second quarter as fresh projects begin, it also expects more easing measures in coming months.