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Surprise rate cut in China

2022-08-15T19:16:51.207Z

The world's second largest economy hopes to avoid a slowdown in consumption. This is a reverse strategy of those adopted by all major central banks. From the United States to the European Union, via the United Kingdom, many have raised their key interest rates in the face of galloping inflation. To the surprise of investors, the People's Bank of China (PBC) announced on Monday August 15 that it was lowering two of its main rates. It decided to cut the rate on its one-year



This is a reverse strategy of those adopted by all major central banks.

From the United States to the European Union, via the United Kingdom, many have raised their key interest rates in the face of galloping inflation.

To the surprise of investors, the People's Bank of China (PBC) announced on Monday August 15 that it was lowering two of its main rates.

It decided to cut the rate on its one-year loans by 10 basis points to 2.75%, as well as the seven-day repo rate, the latter from 2.1% to 2%.

Read also“Covid zero” aggravates the real estate crisis in China

Thanks to this second cut in its key interest rates since the start of the year, the world's second largest economy hopes to avoid a slowdown in consumption.

Indeed, the decision of the Chinese central bank comes after the publication of a series of disappointing indicators showing a slowdown in economic activity in July.

In question: the government's "zero Covid" strategy which leads to reconfigurations and the real estate crisis, very sensitive in a country where this sector accounts for a quarter of the national wealth.

Last month, house prices fell again (-0.9% year-on-year), while industrial production and retail sales came out weaker than expected.

Companies and households having reduced their borrowing, the

In recent months, many economists have revised their forecasts downwards.

They question Beijing's ability to meet its 5.5% economic growth target this year.

Already in the second quarter, it was only 0.4% over one year.

Some predict that GDP will only grow by 4% in 2022. This would mark the weakest growth in China since 1990 with the exception of 2020, a year affected by the pandemic.

In China, although inflation is at its highest for two years (at 2.7% in July), it is still moderate.

Source: lefigaro

All business articles on 2022-08-15

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