The People’s Bank of China (PBOC) has cut the interest rate by 25 bps in a surprise move for the first time in 4 years. Though the rate cut is not large, the timing was a surprise and the action indicates that the Chinese central bank is ready to act to prevent a much feared hard landing of the Chinese economy. The Chinese economy has faced the maximum impact from the ongoing slowdown in demand from the Euro region because the European Union (EU) is China’s single largest customer, and weak demand from EU has led to worries about the knock-on effect to domestic consumption if industrial activity loses steam dramatically. Continue reading China Cuts Interest Rate by 25 bps – First Time in 4 Years
Tag Archives: Chinese banks
China reduces Reserve Requirement Ratio by 50bp
China’s central bank said over the weekend it will lower the reserve requirement ratio (RRR) that banks must hold as reserves to 20.5 percent from 21 percent, effective Friday. This 50 basis points (bp) reduction will free up tens of billions of dollars for loans at a time when the growth rate is expected to drop from last quarter’s 8.9 percent to closer to 8 percent. This is the second rate cut in two months.
Chinese real construction companies, and global commodity stocks, especially base metals like copper and aluminium, should benefit from this move. Investors hoping for more lending in the real estate sector pushed up Chinese property shares and banks. Hong Kong-listed China Resources Land Ltd. rose 1 percent and China Overseas Land & Investment Ltd. added 1.3 percent. China Construction Bank Corp. added 1.1 percent.
World stock markets were also positive on hope that Greece will clinch the aid to avoid bankruptcy. Whether Greece can actually implement and deliver an auterity plan is not a consideration for now! Continue reading China reduces Reserve Requirement Ratio by 50bp