Here comes one surprise move by China’s central bank, in an attempt to revive the growth of Asia’s largest economy, which is showing clear signs of slowing, so much so that the growth target for the current year has become more challenging. Monetary authorities, also following the Fed’s move last week, have decided to reduce the interest rate to 14 daysi, injecting the equivalent of $10.6 billion into the financial system.
The People’s Bank of China’s move
The People’s Bank of China has surprisingly decided to cut the repo rate (repo) at 14 days of 10 basis pointscarrying it at 1.85% from 1.95% previously. In this way, the central bank injected more liquidity into the financial system, equivalent to 74.5 billion yuan, equivalent to 10.6 billion dollars at current exchange rates.
PBoC’s move comes a few days after the first Federal Reserve cutwhich last week cut interest rates by as much as 50 basis points, sending a strong signal to the markets that it would intervene. A decision that also affected the Chinese central bank, accused of having delayed too long in easing financing conditions for the economy.
The reaction of the stock markets
Following the unexpected announcement by the Chinese central bank, the Asian markets have picked up the pacereaching the session’s highs. Shanghai earns 0.43% and Hong Kong 0.3%, while Taiwan shows a progress of 0.57%. The Tokyo Stock Exchangewhich rose by 1.5%, while Seoul advanced by 0.33%.
European stock markets too they should open the week with the plus signThe Frankfurt Dax futures gain 0.3% and the FTSE 100 futures rise 0.53%, while the FTSE MIB (FIB) contract marks a rise of 0.34%. The Cac-40 in Paris is trailing with a +0.27%. US Futures they are moderately positive with the S&P 500 rising 0.19% and the Nasdaq up 0.33%.
The economy slows down
China’s economy is givingor very clear signs of slowing down. A series of recently published data have highlighted that the retail salesthe industrial production they investments grew more slowly than expected, disappointing economists’ expectations.
The unemployment rate urban unemployment rose to a six-month high, while youth unemployment hit a record high. house prices on an annual basis they fell at the fastest pace in the last nine years, confirming the difficulties of the real estate market.
For this reason Many economists have criticized the central bank, accusing her of acting too late. And today’s announcement comes as the governor Pan Gongsheng to hold press conference tomorrow to unveil a plan to financially support economic development.
