China cuts key rates after third plenum to support economy, but ‘heavy lifting’ needed
- People’s Bank of China lowered the seven-day reverse repo rate, as well as both the one-year and five-year loan prime rates
![China’s third plenum finished on Thursday. Photo: AFP](https://cdn.i-scmp.com/sites/default/files/styles/1020x680/public/d8/images/canvas/2024/07/22/b424d7f8-3f62-416e-ad34-703b7d3c6ddf_c1d3f188.jpg?itok=RiO6jPpx&v=1721625988)
China cut its key short-term policy rate and the mortgage reference rate on Monday, with analysts saying the move just days after the conclusion of a high-level meeting that had focused on reviving the national economy represented “reactive easing”.
The People’s Bank of China lowered the seven-day reverse repo rate – a widely used liquidity injection tool – by 10 basis points to 1.7 per cent in a move to increase financial support for the real economy. In total, the Chinese central bank sold 58.2 billion yuan (US$8 billion) of seven-day reverse repos.
And while analysts expect more rate cuts, they also urged future fiscal measures and policy support to do the “heavy lifting” to help accomplish this year’s economic growth target amid growing external challenges.
Rate cuts will likely add to the pressure on Chinese banks
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