Can a better quality policy response be expected from China?

Handled by many regulatory bodies such as the CSRC, so far the China policy response has been complex.  Only a significant liquidity injection by the PBoC could stabilise the markets, in the current distressed market conditions. Although they triggered the uncertainty that led to the subsequent lack of liquidity which in turn spooked market participants.

The 50 basis point cut in the Reserve Requirement Ratio a few hours ago is clearly not enough. Indeed, the central bank appears poised to do much, much more in the foreseeable future. It is clear that monetary injection is a very efficient tool that can be used to stabilise markets, during equity market crisis.

With a current account surplus running in China at 2% of GDP, inflation under control and the deepest currency reserves in the world, the PBoC need not wait any longer before taking decisive action, says Societe Generale.