IT'S AN EVER MORE UNIPOLAR WORLD:

[T]he global spotlight is on the PBOC as rarely before as three data points converge.

One is a slowing economy with factory-gate inflation trends falling even faster. Two, a cratering property sector crying out for monetary support. Three, news in the last five days that six state-owned banks cut their deposit rates under policymakers' guidance. [...]

It's true that demand for credit is low and unevenly distributed. It's true, too, that there are concerns as disinflationary trends might morph into full-blown deflation.

As a weaker-than-expected Covid-19 reopening trade weighs on manufacturing, China's factory gate prices plunged 4.6% in May, the most precipitous decline in seven years.

Yet strategist Alvin Tan at RBC Capital Markets speaks for many when he warns that rate cuts alone won't solve the biggest headwind -- a "troubled property sector" that's keeping households "under pressure."

Goldman Sachs economist Wang Lisheng says a stumbling real estate sector is an increasing drag on China's 2023, not least its ability to reach the government's 5% gross domestic product (GDP) growth target.

The trouble, Wang says, is "falling demographic demand, a shift in policy focus to support strategically important sectors, and weaker housing affordability."

The problem, in other words, is of a long-term structural nature, not something that adding yuan to the system can fix. This puts the onus less on Yi's PBOC than Premier Li Qiang's reform team, which is reportedly gearing up to recalibrate growth engines.

Tweet   @brothersjudd