China’s economy struggles to recover, cuts interest rates 

China’s economy: central bank has slashed one of its key interest rates for the second time in three months as the planet’s second-largest economy struggles to recover from the outbreak.

The People’s Bank of China (PBOC) reduced its one-year loan prime rate to 3.45% from 3.55%.

China’s economy post-Covid recovery has been struck by a property problem, sinking exports and weak consumer spending.

In contrast, other significant economies have lifted rates to tackle high inflation. IN JUNE, the PBOC last trimmed its one-year rate – on which most of China’s household and company loans are based.

Jun Bei Liu from Tribeca Investment Partners told the BBC that the move is improbable to have a practical impact but does indicate the Chinese government’s dedication to reviving the economy.

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“We will need a bigger stimulus package to boost confidence and drive up consumption and growth. Without it, the economy is risking faltering into deflation which will be harder to revive,” she continued.

Economists had also predicted the bank to reduce its five-year loan prime rate, which the nation’s mortgages are pegged to. Nevertheless, it was intact at 4.2%.

Short- and medium-term rates were cut in a shock move last week.

“More rate cuts could be announced in conjunction with government spending, as well as targeted measures to help the property market,” stated Fidelity International’s investment director Catherine Yeung.

Source – BBC