New Delhi: China has announced a rare briefing on the economy featuring three top financial regulators, coinciding with a cut in one of its short-term policy rates. This has sparked speculation that the government is preparing to increase efforts to boost economic growth.
On Monday, Central Bank Governor Pan Gongsheng will hold a press conference to discuss financial support for economic development, alongside two other officials. This announcement came shortly after the People’s Bank of China (PBOC) reduced the 14-day reverse repurchase rate, continuing the rate cuts that began in July.
These actions have led to expectations that the PBOC will lower rates further, especially following the US Federal Reserve’s recent rate cuts. The central bank has also indicated that it is ready to implement additional supportive measures. Concerns have grown that China might fall short of its annual growth target of around 5 per cent, especially after disappointing economic data in August.
In the bond market, the yield on China’s 10-year government bonds dropped by one basis point to a new low of 2.03 per cent, suggesting that traders anticipate more monetary easing. Additionally, in the foreign exchange market, the PBOC raised its daily reference rate for the yuan to 7.0531 per dollar, bringing the critical 7 level closer.
The recent decision to lower the 14-day rate from 1.95 per cent to 1.85 per cent comes ahead of the National Day Holiday, which lasts for seven days starting October 1. The PBOC usually provides 14-day loans before long breaks; the last time it did so was in February for the Lunar New Year holiday.
The central bank also injected 74.5 billion yuan (about $10.6 billion) into the banking system to improve liquidity.
China’s central bank has another opportunity to reduce the cost of its one-year policy loans on Wednesday. In July, the PBOC cut the seven-day reverse repo rate just before significantly lowering the medium-term lending facility for the first time since April 2020.
