SHANGHAI/SINGAPORE, July 22 (Reuters) – China cut short
and long-term rates by 10 basis points on Monday, with the
central bank saying it was aiming to support growth.
The move follows Beijing’s release of a policy document on
Sunday outlining its ambitions for the economy.
The People’s Bank of China cut rates on its seven-day
reverse purchase agreements, leading to a similar drop in its
loan prime rates (LPR), pulling bond yields down across the
curve.
COMMENTS:
BEN BENNETT, HEAD OF INVESTMENT STRATEGY FOR ASIA, LGIM,
HONG KONG
“It was definitely a surprise. And even more so given that
the PBOC has been guiding bond yields higher. It’s interesting
timing coming straight after the third plenum and possibly
signals a pro-growth shift. Let’s see if the July politburo
follows up with more support.”
GARY NG, ASIA-PACIFIC SENIOR ECONOMIST, NATIXIS, HONG KONG
“If we look at the fundamental situation in the Chinese
economy, we have a very weak Q2 GDP data, real rates are very
high in China. So basically all the fundamental factors point to
the fact that China needs a lower rate environment, especially
the real rate is really high…in this kind of disinflationary
environment.
“What is surprising to me is that the authorities had
probably focused a bit more on the foreign exchange rate and
volatility before, but maybe right now they think that the U.S.
dollar may not be as strong as before and this time, it opened a
door of opportunity for them to act.
“Basically, I think the general trend is that it’s pretty
much in line with the fact that the economy is not that great,
and it seems that there’s a bit of urgency from the authorities
to stimulate it now.”
(Reporting by Rae Wee, Winni Zhou, Ankur Banerjee; Editing by
Jacqueline Wong)
