China struggles from high debt level, need for deleveraging and many old sectors' over capacity. PBoC will likely reduce interest rates in further quarters, in order to ease this debt burden.

The RRR ratio would also decline further over next 6 months. The domestic banks suffer from an increase in non-performing loans and monetary policy easing is necessary in order to reduce the credit tightening standards, as a consequence of deteriorating asset quality in the banks.

"People's Bank of China (PBoC) will reduce interest rates by 75bp over the next couple of quarters. We also look for a further decline in the reserve requirement ratio by 100bp over the next six months", says Danske Bank in a research note.