In an attempt to provide impetus to the slowing economic growth, China’s central bank cut interest rates unexpectedly on Monday as 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 percent.
The seven-day reverse repo rate was lowered to 2.0 percent from 2.10 percent. 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 percent in July from 3.9 percent in June, while growth was forecast to improve to 6.2 percent.
Retail sales advanced 2.7 percent in July, slower than the 3.1 percent rise in June. Economists had forecast sales to advance 5.0 percent.
During January to July period, fixed asset investment climbed 5.7 percent from the same period last year. This was slower than the 6.1 percent increase in the first half of the year and economists’ forecast of 6.2 percent.
Meanwhile, property investment declined 6.4 percent in the first seven months of the year.
The surveyed jobless rate dropped to 5.4 percent in July, while it was forecast to remain unchanged at 5.5 percent.
The July data suggest 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 percent due to the strict zero-COVID policy, casting doubt over Beijing’s ability to achieve its growth target of around 5.5 percent.
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