The People’s Bank of China cut the key interest rate that provides short-term liquidity to banks from 2.1% to 2%. In a statement, the central bank said it had cut the interest rate on the one-year loan facility from 2.85% to 2.75% in order to “maintain reasonable and sufficient liquidity in the banking system.”
It’s the first rate cut since January.
“The PBOC appears to have decided it now has a more pressing problem,” Julian Evans said. , making it less responsive to policy easing than it was during previous recessions.” Pritchard, senior China economist at Capital Economics, said in a research note on Monday:
Economic data for July released on Monday were far below expectations.
The National Census Bureau reported that retail sales rose 2.7% year-on-year in July, slowing from 3.1% growth in June.the number is wide It missed the 5% increase predicted by economists in a Reuters poll. Industrial production in July rose 3.8% year-on-year, down from his 3.9% growth in June. It also missed market expectations of a 4.6% gain.
In addition, the slump in real estate It’s getting even more intense. NBS data show that property investment by the developer fell 6.4% in the first seven months of the year, accelerating from a 5.4% decline in the first half. Meanwhile, new home prices in 70 major cities fell in July for the 11th straight month.
“July data suggests the post-lockdown recovery has lost momentum,” said Evans-Pritchard of Capital Economics.
Angry homebuyers across the country are threatening to stop making mortgage payments on unfinished homes, shaking markets and prompting developers and authorities to take action to defuse the crisis.
The real estate market is already suffering from prolonged price declines and a liquidity crisis, engulfing some of the country’s largest developers.
Evans-Pritchard said it was unclear whether Monday’s rate cut would be enough to revive credit growth.
“The current weakness in loan demand is partly structural, reflecting a loss of confidence in the housing market and uncertainty from repeated disruptions from China’s zero Covid strategy.
“These are problems that monetary policy cannot solve easily,” he added.
NBS spokesperson Fu Linghui also expressed concern on Monday that extreme heat and rainfall are hurting food production and causing inflation in the country.
“Affected by continued high temperatures in many places, the price of fresh vegetables increased by 12.9% year-on-year, significantly higher than the same period last year,” Mr. Fu said. said at a news conference in Beijing on Monday.
He pointed out that extreme heat has caused drought in some agricultural areas in the south. In the north, rainfall and flooding caused some crops to fail.
“August and September are important times for grain production in the fall. [We must] We should pay close attention to the impact of natural disasters, insects and diseases on our country’s food production,” he added.