It’s been a significant day in China with the announcement of a range of measures by PBoC Governor Pan Gongsheng.

China’s economic stimulus plan includes a series of monetary easing measures. The seven-day reverse repurchase rate will be reduced from 1.7% to 1.5%, and the reserve requirement ratio (RRR) will be cut by 0.5 percentage points, injecting 1 trillion yuan into the financial system. Additionally, the medium-term lending facility (MLF) is expected to be reduced by 0.3 percentage points. The minimum down-payment for second-home buyers will drop from 25% to 15%, making home purchases more accessible.

The RRR cuts will likely continue this year, potentially decreasing by another 0.25 to 0.5 percentage points, though small banks are excluded. The loan prime rate (LPR) and deposit rates are anticipated to fall by 0.2 to 0.25 percentage points. Furthermore, the People’s Bank of China (PBOC) will now provide full coverage of loans for local governments purchasing unsold homes, increasing from the previous 60%. Moreover, an equity support fund is reportedly in the works, with an estimated size of $113 billion.

It comes at a crucial time, as China’s economic nowcasts have plummeted following an earlier rebound before the summer, which we have dubbed the “tariffs frontloading syndrome.” However, the big question is whether this package is sufficient to reverse the trend in China, and our initial analysis overwhelmingly suggests that it is not.

Once again, China appears to be bringing chopsticks to a gunfight.

Chart 1a: Chinese air pollution hints of weakening industrial production momentum

Chart 1b: Congestion based nowcasts are weakening towards pandemic levels