China to lower borrowing costs

Chinese policymakers have begun to work on lowering borrowing costs in three ways, easing monetary policy, deepening capital markets and transferring risk from government corporates to the government. 

This should be effective in reducing liquidity risk. While monetary policy easing has garnered most of the market attention, the policymakers will be aware of its clear side-effects and refrain from quantitative easing, says Societe Generale.

Instead, the latter two methods should play a more important role over the medium term.