[Salon] China cuts rates after data indicate economic slowdown

[Chas Freeman <cwfresidence@gmail.com>]

https://mailchi.mp/cusef/china-us-express-january-3-5880149?e=c05cda21b0

China cuts rates after data indicate economic slowdown

• China’s key economic data (Zh/En) in July indicate a slowing economic growth that is “alarming” to economists.

  • The total value added of the industrial enterprises above the designated size increased by 3.8% from last year, down by 0.1% from June.

  • The annual expansion of retail sales dropped 0.4% from June to 2.7%.

  • The investment in fixed assets (excluding rural households) from January to July grew 5.7% from the same period last year, 0.4% lower than the first six months.

  • The urban survey unemployment rate was down by 0.1% from June to 5.4%. The rate for youth aged between 16 and 24 increased by 0.6% to a record high of 19.9%.

  • The investment in real estate development (Zh) in the first seven months shrank 6.4% from a year ago, with sales of commercial housing down 28.8%, enhancing a downward trend in the sector.

• As a response, the People’s Bank of China (PBoC) lowered two benchmark rates for the first time since January by ten basis points. The central bank cut the rate on 400 billion yuan of one-year medium-term lending facility (MLF) loans to 2.75% and decreased the seven-day reverse repo rate to 2%.

• Before the data was released, the PBoC and the China Banking and Insurance Regulatory Commission (CBIRC) issued a joint statement (Zh) on Friday. According to the statement, insurers will be allowed to sell perpetual bonds from September 9. “This is an important move to further broaden capital replenishment channels for insurance companies and improve their core solvency adequacy,” the regulators said (Zh). The method has been widely used by banks in China after the PBoC (Zh) gave the green light to it in 2018.