Talking Point  

How Chinese authorities are tackling investor woes

How Chinese authorities are tackling investor woes

The Chinese government is likely to reduce the amount of capital required to be held by banks, in their latest move designed to dampen investors' woes.

This is according to Craig Botham, emerging markets economist at Schroders, who expects this move would free up more capital for investments to take place in the country. 

He said: "For China, slower global growth and intensifying trade wars could see the central bank ease monetary policy in 2019." 

Mr Botham said the reserve requirement ratio - a central bank regulation setting out the minimum amount of reserves that must be held by a commercial bank - "is likely to face another 150 basis points in cuts, at least, from current levels". 

Scott Gallacher, a chartered financial planner at Rowley Turton, said: "Most experts agree that slowing Chinese growth will be a concern moving forward, although as a command economy China could take steps to address this."

The Chinese economy has come under greater scrutiny from investors in recent months amid fears the country is headed for an economic slowdown. 

China's GDP growth slipped to 6.6 per cent in 2018, its slowest annual growth rate since 1990, data from the National Bureau of Statistics of China showed. 

Annual growth in 2017 was 6.8 per cent.

In the fourth quarter of 2018, GDP growth was 6.4 per cent - this marked the third quarter of a decline in GDP growth in China.

A recession, by definition, is commonly defined as two consecutive quarters of negative growth.

China's manufacturing sector also contracted in December, with the Caixin manufacturing PMI slipping to 49.7 in the month, its lowest level since May 2017. 

In a recent poll for FTAdviser Talking Point, 23 per cent of advisers said their clients' portfolios were not allocated to Chinese equities due to slowing growth.

Tensions around trade talks between the US and China started nine months ago. Both the US and China reached a truce last year and held two days of trade talks earlier this month.

But Claudia Calich, manager of the M&G Emerging Markets Bond fund, warned the trade tensions could still have an impact. 

She said: "The ongoing trade conflict has been a significant driver of global asset prices as the tension has hit global trade as well as corporate earnings (including Apple).

"If the present trade talks go nowhere, one should expect further global growth weakness, something which could affect emerging markets." 

saloni.sardana@ft.com