FXStreet (Delhi) – Zhiwei Zhang, Research Analysts at Deutsche Bank, suggests that the Chinese government has the capacity to ease policies. Key Quotes “On the monetary front, the reserve requirement ratio is still quite high. We expect 4 RRR cuts in 2016. The one-year deposit rate is currently at 1.5%. With inflation relatively low, the PBoC can cut the benchmark interest rates if downward pressure on growth intensifies. On the fiscal front, total government debt is around 39.6% of GDP, not including the RMB8.6 trillion debt of local government financing vehicles, which has been recognized by the central government. This is lower than the level in major developed economies.” “Further policy easing clearly has its costs. The leverage ratio of the economy will likely rise further and imposes higher financial risks. Loosening of monetary policy may delay the resolution of “zombie companies” and overcapacity problem further. The benefit of short-term growth stabilization will come with pains in the longer term, and the trade-off is becoming increasingly unfavorable. There is room for easing in 2016, but this may come with a hefty price.” For more information, read our latest forex news.