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China scrambles to support its economy with another interest-rate cut as recovery sputters
George Glover
Jun 15, 2023, 6:10 AM EDT
- China’s central bank cut rates on medium-term policy loans Thursday.
- The People’s Bank of China is scrambling to support the economy amid signs of stagnant growth.
- The PBoC’s latest move comes after it cut short-term interest rates to 1.9% earlier this week.
China’s central bank moved to stimulate the country’s stalling economy again Thursday, cutting another key interest rate amid signs of stagnant growth.
The People’s Bank of China said it would lower borrowing costs on its medium-term loans to financial institutions for the first time in 10 months, slashing the rate from 2.75% to 2.65%.
That move comes after the PBoC also lowered short-term interest rates from 2% to 1.9% Tuesday, marking its first cut since August of last year.
The bank’s latest interventions weren’t unexpected – but they do signal that Beijing is battling to boost its economy as its post-C***D recovery shows signs of fizzling out.
When interest rates fall, it’s cheaper for individuals and companies to borrow money, often fueling a boost in spending and investment that would lift economic growth.
Shortly after the medium-term rate cuts were announced, official economic data showed that growth in China’s industrial output had fallen from 5.6% to 3.5% last month, while retail sales figures came in below economists’ expectations.
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Experts remain skeptical that the country will be able to recover from the impact its C***D-era restrictions, which weighed heavily on growth for nearly three years, anytime soon.
In May, R*********r International chair Ruchir Sharma called the idea that China will experience a huge rebound a “charade” – while former International Monetary Fund official Desmond Lachman warned its economy could be headed for a “lost decade” last week.
As well as the rate cuts, Beijing is weighing up a package of stimulus measures that it hopes will boost stuttering growth, according to a Bloomberg report published Tuesday that cited people familiar with the matter.
Source: Markets Insider
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