The People’s Bank of China, the central bank of China, cut short-term policy rates on the 15th.
The People’s Bank of China announced on the same day that it would cut the 7-day reverse repo (reverse repurchase agreement) rate, a short-term policy rate, by 0.1 percentage point to 1.8%.
In addition, it was announced that the interest rate for the one-year mid-term Liquidity Support Facility (MLF) would be cut by 0.15%p to 2.5%.
The MLF loan is a liquidity control instrument through which the central bank lends money to commercial banks.
This brings a total of 605 billion yuan (about US$82.7 billion) of liquidity to the market, according to Chinese media.
■ Production·investment slowdown
The move comes amid rising concerns about a slowdown in China’s economy.
According to a report from China’s National Bureau of Statistics released on the 15th, China’s industrial production, retail sales and investment sectors all showed slower-than-expected growth in July.
Industrial production rose 3.7% year over year, down from the June level of 4.4%, while retail sales, a measure of consumption, rose 2.5% year over year, also down from 3.1% in the previous month.
Investment in the real estate sector decreased by 8.5% from the same period last year during the January-July period of this year, continuing the downward trend for 17 consecutive months.
China’s government suspended the release of its youth unemployment rate report for July. In June, the youth unemployment rate in China hit a record high of 21.3%.
In the midst of this, the American investment bank JP Morgan pointed out the default crisis in China’s real estate investment system.
JP Morgan warned in a report on the 14th that the default crisis of Chinese real estate investment trusts (REITs · REITs) is growing due to the bankruptcy crisis of China’s large real estate developer Country Garden (Biguiyuan).
On the 8th, Country Garden failed to fulfill its debt repayment obligations worth a total of 22.5 million dollars due on the 6th, and on the 10th, it revealed a loss of up to 7.6 billion dollars in the first half of this year.
Country Garden also temporarily suspended trading of 11 bonds from the 14th. A date for resuming trading has not yet been set.
Meanwhile, US Treasury Secretary Janet Yellen pointed out at an event held in Las Vegas, Nevada on the 14th that the slowdown in China is a risk factor for the US economy.
VOA News
2023-08-15 15:02:13
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