Date: August 15, 2022
News Author(s): Geoffrey Smith
Photo Credit: Reuters
Source: investing.com
China's central bank cut a key borrowing rate for the first time since January, in an effort to boost support for an economy hurt by Covid-19 lockdowns and a deflating property bubble.
The People's Bank of China cut its one-year rate by 10 basis points to 2.75%, after the country's sales and production data for July both fell short of expectations It also trimmed its seven-day reverse repo rate.
Retail sales grew only 2.7% from a year earlier in July, slowing from a rate of 3.1% in June amid continued sporadic outbreaks of Covid-19. The numbers disappointed hopes for an acceleration to 5%. Industrial production, meanwhile, rose only 3.8% on the year, a marginal slowdown from a rate of 3.9% a month earlier, while growth in fixed asset investments slowed to 5.1% on the year, extending what is now a five-month slowdown.
The numbers also followed hard on the heels of weak monetary and credit data on Friday, which showed Total Social Financing, the broadest measure of credit in the economy, falling to its lowest since late 2019.
Taken together, the figures suggest that China will continue to struggle to provide support to much of the world economy for the rest of the year. Base metals and crude oil prices all fell, dragging down commodity currencies such as the Australian dollar and the Russian ruble.
Michael Pettis, an economist with the Carnegie Endowment in Beijing, said via Twitter) that the news contrasts sharply with the PBoC's reluctance so far this year to ease policy while the Federal Reserve has been tightening policy in the U.S. He also argued that the cuts were unlikely to give the economy any real support.
"Businesses and households seem to be cutting back on their borrowing because of their concerns about economic weakness. The problem, in other words, is lack of domestic demand, not expensive capital," Pettis said. "I am pretty sure the PBoC knows this. In the end I think it announced the interest-rate cut mainly because it knows that something must be done, but it doesn't know what else to do."
Chinese stock markets fell broadly in response, with the Shanghai Shenzhen CSI 300 falling 0.2%, and the A Shares index falling 0.4%. The offshore yuan fell 0.5% to 6.7690 against the dollar as of 02:50 ET (06:50 GMT).
"With the PBoC clearly acknowledging the need for more stimulus, investors may start to speculate that the 6.80 ceiling in USD/CNY may not be as strong as it seems," said ING analyst Chris Turner in a note to clients.
Elsewhere on Monday, the woes in China's real estate sector went from bad to worse, with house prices falling 0.9% on the year in July, their biggest annual drop in seven years. That development comes against the background of a widespread buyers' strike, with thousands of borrowers refusing to pay their mortgages due to the inability of cash-strapped developers to finish projects due to their inability to raise any more debt.
Keywords: sterlinghousetrust.com, Sterling House Trust, SHT
Sterling House Trust is a private trust with a difference. It offers its members an exclusive and reliable platform to access unique opportunities and lifestyle services reserved for the select few. With its team of professional managers Sterling House Trust constantly scans the markets and collaborate with reliable global partners to create a portfolio of carefully curated programmes for its members. Members can access these programmes according to their individual needs, interest and financial capacity. Sterling House Trust is headquartered in Auckland, New Zealand, and has operations based in London, UK.
The Sterling House Trust platform was established with the objective of providing its members, secure access to opportunities across a range of global locations, sectors and services.
Our unique Platform was established within the framework of a trust so that the trust would have oversight and governance over the range of services and its quality. Member protection is a core principle and drive in all that we do. Our trustees ensures that the interests and quality of service provided by the Platform are always maintained at the highest standards.
The trust and its trustees provide robust oversight and is constantly on the move to identify and shortlist select opportunities in the international markets. Likewise, we apply the same stringent standards in identifying and selecting providers and professional partners to join our Platform.
The Sterling House Trust Platform utilises our international footfall and relationships to provide our members with access to a range of international opportunities via our global network which covers a broad range of sectors including:
Asset protection, international property ownership and management, alternative and direct ownership, estate planning, banking services, foreign exchange, card services, alternative investment and lifestyle services.
New Zealand Head Office
31/335 Lincoln Road,
Addington
Christchurch
New Zealand
London Office
14-16 Dowgate Hill,
London,
England EC4R 2SU