GeneticBlueprint Posted July 22 Share Posted July 22 in China reuters.com WWW.REUTERS.COM Quote China cuts several major interest rates to support fragile economy SHANGHAI, July 22 (Reuters) - China surprised markets by cutting major short and long-term interest rates on Monday, its first such broad move since August last year, signalling intent to boost growth in the world's second-largest economy just days after a Communist Party leadership meeting. The cuts to the central bank's key short-term policy rate, its market operations rates and benchmark bank lending rates came after China reported weaker-than-expected second-quarter economic data last week and its top leaders met for a plenum that occurs roughly every five years. The country is verging on deflation and faces a prolonged property crisis, surging debt and weak consumer and business sentiment. Trade tensions are also flaring, as global leaders grow increasingly wary of China's export dominance. "The cut today is an unexpected move, likely due to the sharp slowdown in growth momentum in the second quarter as well as the call for 'achieving this year's growth target' by the third plenum," said Larry Hu, chief China economist at Macquarie. The People's Bank of China (PBOC) said on Monday it would cut the seven-day reverse repo rate to 1.7% from 1.8%, and would also improve the mechanism of open market operations. That is the first cut to the rate since August 2023. Minutes later, China cut benchmark lending rates by the same margin at the monthly fixing. The one-year loan prime rate (LPR) was lowered to 3.35% from 3.45% previously, while the five-year LPR was reduced to 3.85% from 3.95%. ... Quote "The fact that PBOC didn't wait for the Fed to cut first indicates that the government recognises the downward pressure on China's economy," said Zhang Zhiwei, president and chief economist at Pinpoint Asset Management. He expects more rate reductions in China after the Fed begins a rate-cutting cycle. China's rate cuts are aimed at "strengthening counter-cyclical adjustments to better support the real economy," the PBOC said in a statement. Quote Link to comment Share on other sites More sharing options...
Commissar SFLUFAN Posted July 22 Share Posted July 22 The recently-reported miss (5.1% expected vs 4.7% actual) in the second-quarter GDP definitely spooked their central bank fiercely. Quote Link to comment Share on other sites More sharing options...
Commissar SFLUFAN Posted July 22 Share Posted July 22 Quote The country is verging on deflation and faces a prolonged property crisis, surging debt and weak consumer and business sentiment. Trade tensions are also flaring, as global leaders grow increasingly wary of China's export dominance. This is a practically word-for-word replay of the bursting of the Japanese economic bubble in the 1990s from which that country has never fully recovered: Lost Decades - Wikipedia EN.WIKIPEDIA.ORG 1 Quote Link to comment Share on other sites More sharing options...
CitizenVectron Posted July 22 Share Posted July 22 Conversely, Russia is expect to increase their prime rate to around 18-20% to control their domestic financial issues. Quote Link to comment Share on other sites More sharing options...
finaljedi Posted July 22 Share Posted July 22 7 minutes ago, Commissar SFLUFAN said: This is a practically word-for-word replay of the bursting of the Japanese economic bubble in the 1990s from which that country has never fully recovered: Lost Decades - Wikipedia EN.WIKIPEDIA.ORG I miss the "Japanese will run the world" cyberpunk stories. 1 Quote Link to comment Share on other sites More sharing options...
stepee Posted July 22 Share Posted July 22 Just now, CitizenVectron said: Conversely, Russia is expect to increase their prime rate to around 18-20% to control their domestic financial issues. There’s gotta be some way to game this Quote Link to comment Share on other sites More sharing options...
skillzdadirecta Posted July 22 Share Posted July 22 33 minutes ago, GeneticBlueprint said: in China reuters.com WWW.REUTERS.COM 2 1 1 1 Quote Link to comment Share on other sites More sharing options...
Jason Posted July 23 Share Posted July 23 10 hours ago, skillzdadirecta said: lol come on it was a weak rileying Quote Link to comment Share on other sites More sharing options...
GeneticBlueprint Posted July 23 Author Share Posted July 23 5 minutes ago, Jason said: lol come on it was a weak rileying first of all how dare you and second how dare I 1 Quote Link to comment Share on other sites More sharing options...
Signifyin(g)Monkey Posted July 23 Share Posted July 23 21 hours ago, Commissar SFLUFAN said: This is a practically word-for-word replay of the bursting of the Japanese economic bubble in the 1990s from which that country has never fully recovered: Lost Decades - Wikipedia EN.WIKIPEDIA.ORG One big X factor is that China has a very large proportion of its debts resting in public banks rather than private ones, which might allow it to avoid the prolonged deleveraging that has stretched the contraction in Japan out for decades, and the Renminbi will probably never be as strong as the Yen due to a closed capital account, which will temper the deflationary pressures of an overvalued currency that continually dogs Japan. But China will still face the same demographic problems, and it might shoot itself in the foot if it tries to go after Taiwan. I think the coming decades will render a definitive verdict on whether the modern Mandarin system of rationalized authoritarianism (or 'political meritocracy' as supporters call it) and state capitalism is better equipped to deal with the biggest problems of our era, or whether liberal democracy and liberal markets continues to prevail as the most effective political-economic configuration for modern nation states. 1 Quote Link to comment Share on other sites More sharing options...
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