China surprise cuts interest rates to boost its economy

MADRID, 15 Ago.

China surprise cuts interest rates to boost its economy


The People's Bank of China (PBOC) has announced by surprise on Tuesday a cut in the interest rate of its one-year bank loans of 15 basis points, to 2.5%, the lowest since 2020, with the objective of strengthening the national economy, affected by the real estate crisis and the drop in consumption.

This is the second cut that the institution has undertaken since June and the first under the mandate of the new governor, Pan Gongsheng, a position in which he took over from Yi Gang after his retirement. The Central Bank has also lowered the short-term interest rate by ten basis points.

This unexpected decision occurs on the same day that the Asian country's National Statistics Office (ONE) has released several macroeconomic data that point to a slowdown in the national economy.

Thus, Chinese industrial production rose 3.7% in July in the interannual rate, compared to the 4.4% growth observed the previous month and below what was forecast by analysts. At the same time, retail sales increased by 2.5% in the seventh month of the year, six tenths less than in June and its smallest rise since the end of 2022.

The ONE has stressed in a statement that although the Chinese economy continues to recover, "the international political and economic situation is complicated and domestic demand remains insufficient."

"It is necessary to continue consolidating the foundations of the economic recovery (...) We must intensify the role of macro policies in regulating the economy and make solid efforts to expand domestic demand, shore up confidence and prevent risks," says the Chinese Bureau of Statistics.

One of the main risks of the Chinese economy is its real estate sector, as demonstrated by the problems that the developer Country Garden is going through, which has been in the news these days due to the sharp correction in its actions.

The company has ensured that since 2021 "the sector has entered a period of unprecedented difficulties with multiple unfavorable factors, which has resulted in serious problems for sales and financing in the market."

In this way, the problems of Country Garden are causing the Chinese real estate sector to falter again, barely two years after the beginning of the difficulties of another colossus such as Evergrande.