CNN Business: China cuts rates as lockdowns and a real estate crisis take their toll
By Laura He, CNN Business
Updated 4:07 AM ET, Mon August 15, 2022
https://www.cnn.com/2022/08/15/economy/china-pboc-cuts-rates…
Hong Kong (CNN Business)China’s central bank cut interest rates on Monday as new data showed the economy losing steam last month because of renewed Covid lockdowns and a deepening property downturn.
The People’s Bank of China reduced the main rate at which it provides short-term liquidity to banks, from 2.1% to 2%. The central bank also cut the rate of its one-year lending facility from 2.85% to 2.75% in order to “maintain reasonable and sufficient liquidity in the banking system,” it said in a statement.
It was the first time since January that those rates had been cut.
More:
Economic data published Monday for July was much worse than expected.
Retail sales grew 2.7% in July from a year ago, slowing from June’s 3.1% growth, the National Bureau of Statistics reported. That number widely missed the 5% increase forecast by economists in a Reuters poll. Industrial production was up 3.8% in July from a year earlier, down from the 3.9% growth in June. It also missed the market expectation of a 4.6% rise.
Mish’s view has a very good pair of tweet threads by others on this surprise announcement from China:
Mish headline: China Does Surprise Rate Cut to Help Its Economy, But It Won’t Work
Mish sub-headline: In a surprise move, China is bucking the global trend towards rate hikes hoping to stimulate demand.
https://mishtalk.com/economics/china-does-surprise-rate-cut-…
Beijing has been pumping the supply side of the economy with credit, subsidies, tax rebates, and spending on improved logistics, but that still hasn’t been enough to overcome zero-COVID policies and weak domestic demand.
The real problem of course continues to be domestic demand. Retail sales in July were up 2.7% year on year and up 0.27% month on month. Year to date they were down 0.2%, much worse than the already-disappointing 0.3% increase recorded last month.
Beijing has been pumping the supply side of the economy with credit, subsidies, tax rebates, and spending on improved logistics, but that still hasn’t been enough to overcome zero-COVID policies and weak domestic demand.