China's Monetary Policy Push Hits Consumer Wall: Rate Cuts Aren't Moving the Needle

China's central bank faces a classic economic dilemma: you can lead a horse to water, but you can't make it drink. Despite aggressive monetary easing, including deeper-than-expected rate cuts, consumer lending remains sluggish, highlighting structural challenges in the world's second-largest economy.

Goldman Sachs analysts now project a 50-basis-point reserve requirement ratio (RRR) cut before year-end, doubling previous estimates. This follows Monday's surprise rate cut intensity, suggesting Beijing's growing concern about economic momentum.

However, Capital Economics' Zichun Huang warns that monetary stimulus alone won't catalyze credit demand. Without substantial fiscal intervention, China's growth targets may barely squeak by.

China is in a deflationary and demographically induced downward spiral, and the classic keynesian approach will not get us anywhere, especially not after the real estate market, which has acted as a kind of artificial economic stimulus program for decades, has also collapsed.

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