CNY: China cuts 1-year loan prime rate as recovery drags
The People's Bank of China cut the 1-year Loan Prime Rate (LPR) on Monday by 10 basis points to 3.45% while keeping the 5-year LPR at 4.2%.
IGTV’s Angela Barnes looks at how the decision highlights the economic conundrum Chinese authorities are facing.
(Video Transcript)
The People's Bank of China
In other news, let's move on to China, because after a reduction of the one-year loan facility rate by 15 basis points last week, the market expected the People's Bank of China to do the same with loan prime rates this Monday. It indeed cut the one-year LPR but by 10 basis points to 3.45%. As for the five-year Loan Prime Rate (LPR), the People's Bank of China (PBOC) decides to keep it at 4.2%. Well, this decision highlights the economic conundrum that Chinese authorities are facing. On one hand, it needs to do something about its declining growth trend and stimulate weakened demand in the country.
The Yuan
But on the other, the yuan is on a downward trend since the start of the year, and any further easing would trigger further sell-offs. Well, the yuan is currently trading near its all-time low against the US dollar. Let me see if I can try and bring up that chart for you. Yes, the yuan is currently trading near its all-time low against the dollar. And as we've now had several months of disappointing economic data from China, well, the country's post-COVID economy has been flagging across many sectors with youth unemployment at a record level and weak retail sales as consumers reign in their spending.
Country Garden
Additionally, missed bond payments by real estate giant Country Garden has weighed on the minds of investors. Well, China's securities regulator announced measures on Friday to boost confidence in the country's stock market. China's Shanghai Composite has fallen by 2% in the past month, while Hong Kong's Hang Seng has fallen more than 12% this month, setting a new 2023 low.
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