(Bloomberg) -- China needs to be more aggressive cutting interest rates to stem the slowdown in the world’s second-biggest economy, British advertising mogul Martin Sorrell says.
Chinese authorities should take advantage of the Federal Reserve’s 50-basis-point cut last week because it gives them “wiggle room” to lower borrowing costs, said Sorrell, who founded ad behemoth WPP Plc and is chairman of S4 Capital Plc.
“The thing I’m looking for is for the government to change their stance here and be a bit more expansive,” Sorrell said on Sunday on the sidelines of an international business conference in Shanghai. “Because they do have wiggle room. I’m looking for a bigger step because they do have flexibility on interest rates and lowering them.”
Despite a cut in a short-term policy rate on Monday, Chinese officials have broadly refrained from more aggressive monetary stimulus as the nation’s financial institutions struggle with record-low profit margins.
Pressure is growing on the government to do more to bolster growth following August data that raised doubts on whether China will reach its growth target of around 5% this year. Compounding the economic angst is data last week that showed a slide in budget spending and a rise in the youth jobless rate.
The years-long real estate slump that’s wiped out an estimated $18 trillion in wealth from households has been the single biggest challenge confronting the Chinese economy. It’s cost millions of jobs, ravaged consumer confidence and diminished demand for products like steel.
Rio Tinto Group Chairman Dominic Barton, who attended the same business summit, said that while stimulus would give a boost to the economy, the process of property restructuring will go on for some time.
“The key thing is unlocking the consumer,” Barton said. “And the challenge you have with that is you got the property prices going down and people having a lot of their wealth and property — they feel less wealthy. And we’re seeing the effect of that.”
While stimulus programs “are music to people’s ears,” they have to understand is that there is a deeper restructuring for growth that’s going on, he said.
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