JAKARTA (TheInsiderStories) — The bamboo curtain country is on its path to relieve the economic slowdown. China’ central bank took action by distributing RMB1.14 trillion (US$169 billion) into several banks this week, and created a lower borrowing cost.
The step was taken to provide funding shortage ahead of Chinese new year. People’s Bank of China (PBoC) expects, banks can provide cheaper funding to companies.
By this, PBoC successfully increased market liquidity, without cutting benchmark interest rate. China’s 7-Day Reverse Repo rate keep being maintained at 2.55 percent.
Thanks to the strategy, Chinese banks get lower costs below the 7-Day Reverse Repo rate. It is also expected that banks can disburse more loan to companies amid low interest rate and slowly re-boost its economy.
China’s economy this year has been estimated to slowdown. In 2018, even though the figure was double than global economy, China’s economy expanded by 6.6 percent, the slowest growth in almost three decades. This impacts much to the world as China economy accounts for almost one-third of global economic growth.
The slowdown economy also hits a lot of foreign companies that operate in the country. China’s world’s biggest population is a great market. The sinking demand due to economic slowdown has impacted Apple, Starbucks, Jaguar Land Rover, etc.
As bunch of goods are made in China, the condition will hit most—or probably all—countries economy. China’s severe slowdown could shave 1.5 percent United States‘ (US) economic growth over two years. Among commodity exporters, Russia would be hurt the most.
Trade-dependent Singapore and Hong Kong would also suffer badly. Taiwan, Thailand and other countries that feed components to China’s massive manufacturing machine are also threatened.
China’s economy has high impact to Indonesia, as export is one of the economic growth components. China has been Indonesia’s main export market for years. In December 2018 only, Indonesia’s non-oil and gas export to China was US$1.67 billion.
It contributes 13.43 percent of Indonesia’s whole non-oil and gas export in the period of time. During the year, China is also Indonesia’s biggest importer valued $45.24 billion, accounts for 28.49 percent.
China imports industrial raw material such as organic basic chemical material and palm oil processed products from Indonesia. If China domestic consumption increases, opportunity for Indonesia to penetrate finished goods like paper, furniture, wooden goods, processed rubber, CPO derivative products such as oleochemical, and so on, will open wider, and vice versa.
According to analysts, whatever happen to China’s Gross Domestic Product (GDP) will also impact Indonesia’s GDP. By the calculation, every 0.5 percent of China’s decline will shrink Indonesia’s economy by 0.1 percent.
The expectation over China’s economy is not only on its policy, such as the borrowing costs downturn. Global eyes are now at China and United States scheduled meeting, in Davos, Switzerland, January 22.
Chinese Vice President Wang Qishan will meet US Treasury Secretary Steven Mnuchin. Previously, President Donald Trump was expecting to attend the talks. But he cannot go amid the unsettled government shutdown over Mexican border wall fight with Dems.
If both China and US could really agree on trade peace, world economy probably return to bloom. So far, ahead of the US – China talks, Asian stocks market blown by its nice sentiment.
Written by Linda Silaen and TIS Intelligence Team