He People’s Bank of China cut this Monday a interest rate key, in an attempt to reverse the post-covid economic slowdown of the western giant
The world’s second largest economy was recently dragged down by the uncertainty in the labor market and for one slowdown global, which weighs on the demand for Chinese products.
The financial problems of real estatewith several industry heavyweights on the verge of bankruptcy and struggling to complete projects, is also a major hit to growth.
Another sign of slowdown is that household loans reached the lowest level since 2009 last month.
The People’s Bank of China lowered a key rate: what was it and how much was it reduced
Faced with this situation, the prime lending rate (LPR) The one-year loan, which serves as a benchmark for loans to households and businesses, was cut from 3.55% to 3.45%, the bank said. People’s Bank of China (PBoC) in a statement. This rate had already been cut in June.
The 5-year LPR rateused to set the mortgage pricehowever, remained at 4.2%.
Closely watched by the markets, both rates are now at all-time lows.
The measure on Monday, contrary to the trend in Western central banks, which have raised rates to curb inflation, is intended to encourage Chinese commercial entities to lend money at more advantageous interest rates to companies and households.
Analysts interviewed by the Bloomberg agency, however, expected a more ambitious rate cut.
“This cut of the LPR rate is disappointing”, and could even be counterproductive if the markets interpret it as a “reluctance” of the Chinese power to take more consequential stimulus measures, he stressed. Maggie Weiof the North American bank Goldman Sachs.
Chinese stocks did not welcome the announcement: Shanghai lost 1.24% at the close, Shenzhen 1% and Hong Kong 1.82%.
On Friday, the central bank and financial regulators had highlighted the need to “support” the economy more and reduce “hidden risks and dangers,” according to official media reports this Sunday, without specifying their nature.
China: the long-awaited post-covid recovery lost momentum in recent months
The long-awaited post-covid recoveryafter the end of the sanitary restrictions at the end of 2022, lost momentum in recent months, and the real estate still in crisis.
Promoter’s problems Country Gardenlong considered sound and now highly indebted, raises fears of a bankruptcy with immeasurable consequences for the Chinese financial system.
The bad indicators of the last few weeks accentuate the pressure in favor of a broad stimulus package, something that the authorities refuse to do in order not to increase the debt.
Instead, the government multiplied the measures in favor of the private sector, badly hit during the health crisis, and consumption, through tax deductions.
But these provisions do not seem to have much effect, at a time when one in five young people is also unemployed.
The economic slowdown jeopardizes the growth target set by the authorities, around 5% for this year.
If achieved, in any case it would be one of the China’s lowest annual growth rates in decadesnot counting the pandemic period.
Beijing on Wednesday acknowledged economic “difficulties” but criticized the pessimism of Western analysts, who questioned its ability to support global growth.
“They will surely be proven wrong,” he warned. Wang Wenbinspokesperson for the Chinese Ministry of Foreign Affairs.
Source: Ambito
