China is the first noticeable crack in the COVID-19 recovery.
The only major economy to show any growth at all last year, the country is now taking steps to ease monetary policy — just when the Federal Reserve is beginning to lay the groundwork to taper asset purchases. A significant slowing of its expansion might give other commercial powers pause about the robustness of the global upswing, and a taste of how hard it may be to meaningfully withdraw stimulus.
Just this month, the People's Bank of China cut its reserve requirement for most banks by half a percentage point. The move, which will unleash about 1 trillion Chinese yuan ($154 billion) of long-term liquidity, was flagged by Beijing earlier this week, but surprised economists with the speed of its arrival. Officials may be signaling that economic growth data for the second quarter, due for release next week, will be soft.