China reduces interest rates as economy struggles

China’s central bank on Monday cut interest rates unexpectedly to provide impetus to the slowing economic growth.

The official data revealed weaker-than-expected industrial production and retail sales growth amid falling property investment.

In a surprise move, the People’s Bank of China reduced its key policy rate for the first time since January.

The bank reduced the one-year medium-term lending facility by 10 basis points to 2.75 per cent.

The seven-day reverse repo rate was lowered to 2.0 per cent from 2.10 per cent.

The central bank injected CNY 400 billion through one-year MLF and CNY 2 billion via seven-day reverse operations.

Data published by the National Bureau of Statistics showed that industrial production growth decelerated to 3.8 per cent in July from 3.9 per cent in June, while growth was forecast to improve to 6.2 per cent.

Retail sales advanced 2.7 per cent in July, slower than the 3.1 per cent rise in June. Economists had forecast sales to advance 5.0 per cent.

From January to July, fixed asset investment climbed 5.7 per cent from the same period last year.

This was slower than the 6.1 per cent increase in the year’s first half and economists’ forecast of 6.2 per cent.

Meanwhile, property investment declined 6.4 per cent in the first seven months of the year.

The surveyed jobless rate dropped to 5.4 per cent in July, while it was forecast to remain unchanged at 5.5 per cent.

The July data suggested that the post-lockdown recovery lost steam as the one-off boost from reopening fizzled out, and mortgage boycotts triggered a renewed deterioration in the property sector, economists at Capital Economics said.

The outlook is likely to remain challenging in the coming months as exports turn from tailwind to headwind, the property downturn deepens, and virus disruptions remain a recurring drag, they noted.

In the second quarter, the economy had expanded only 0.4 per cent due to the strict zero-COVID policy, casting doubt over Beijing’s ability to achieve its growth target of around 5.5 per cent. 

(dpa/NAN)