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☆ China keeps lending benchmarks unchanged; economic weakness tests policymakers
▼ + stars: | 2023-07-20 | by ( ) www.reuters.com time to read: +2 min

SHANGHAI/SINGAPORE, July 20 (Reuters) - China left its lending benchmarks unchanged on Thursday, after the central bank stood pat on a key policy rate earlier this week even as signs of a faltering economic recovery called for more stimulus. The one-year loan prime rate (LPR) was kept at 3.55%, while the five-year LPR was unchanged at 4.20%. The steady LPR fixings come as the People's Bank of China (PBOC) rolled over maturing medium-term policy loans and kept the interest rate unchanged earlier this week. The medium-term lending facility (MLF) rate serves as a guide to the LPR and markets mostly use the MLF rate as a precursor to any changes to the lending benchmarks. Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.

Persons: Winni Zhou, Tom Westbrook, Jacqueline Wong Organizations: United, People's Bank of China, Thomson Locations: SHANGHAI, SINGAPORE, China, United States

☆ Wall Street banks cut China's growth forecast after dull second quarter
▼ + stars: | 2023-07-17 | by ( Aniruddha Ghosh | Roshan Abraham | ) www.reuters.com time to read: +2 min

(Reuters) -J.P.Morgan, Morgan Stanley and Citigroup trimmed China’s growth forecast for 2023 after the country’s economy grew at a weaker pace in the second quarter, with its post-COVID momentum unravelling rapidly. “Market scepticism on China’s growth outlook is on the rise,” said Morgan Stanley economists led by Robin Xing. JPM cut China’s Gross Domestic Product (GDP) forecast to 5% from 5.5%. Citi, meanwhile, expects a 20 bps cut in the policy rate and 25 bps in the reserve requirement ratio (RRR) by the end of the third quarter. Goldman Sachs, however, maintained its 2023 full-year GDP growth forecast at 5.4%, even as they cut their current-quarter growth forecast to 5.5% on a quarter-on-quarter basis from 6.5% previously.

Persons: Morgan Stanley, ”, Robin Xing, China’s, JPM, “, Xiangrong Yu, ” Morgan Stanley, Goldman Sachs, Lisheng Wang Organizations: Reuters, Citigroup, Citi Locations: China, Beijing

On a year-on-year basis, GDP expanded 6.3% in the second quarter, accelerating from 4.5% in the first three months of the year, but the rate was well below the forecast for growth of 7.3%. "The data suggests that China's post-COVID boom is clearly over," said Carol Kong, economist at Commonwealth Bank of Australia in Sydney. The latest data raises the risk of China missing its modest 5% growth target for 2023, some economists say. Authorities are likely to roll out more stimulus steps including fiscal spending to fund big-ticket infrastructure projects, more support for consumers and private firms, and some property policy easing, policy insiders and economists said. So I think this does raise greater urgency for more policy support soon."

Persons: Carol Kong, Alvin Tan, Harry Murphy Cruise, Kevin Yao, Ellen Zhang, Joe Cash, Shri Navaratnam Organizations: National Bureau, Statistics, Reuters, Commonwealth Bank of Australia, Analysts, Authorities, Asia FX, RBC Capital Markets, stoke, Moody’s, Thomson Locations: BEIJING, Shanghai, Sydney, China, Asia, Singapore

☆ Instant View: China's Q2 GDP growth slows to 0.8% q/q, raises stimulus expectations
▼ + stars: | 2023-07-17 | by ( ) www.reuters.com time to read: +11 min

"Consumers are not spending, mainly driven by the bleak outlook for the property market. Disappointing retail numbers and property market sales show it doesn't seem that the boost from rate cuts is sufficient. ..the property market is beginning another slowdown - the government will have to come up with more stimulus for property." "Nonetheless, we think more stimulus is required to stabilise and restore confidence in the property market." ZHIWEI ZHANG, CHIEF ECONOMIST, PINPOINT ASSET MANAGEMENT, HONG KONG"Nominal GDP growth turns out to be lower than real GDP growth in Q2, the first time since comparable data are available in Q4 2016.

Persons: CHRISTOPHER WONG, LOUIS KUIJS, CAROL KONG, XING ZHAOPENG, KEN CHEUNG, ALVIN TAN, VISHNU VARATHAN, MARCO SUN, CHEN, TONY SYCAMORE, ZHIWEI ZHANG, JING LIU Organizations: Gross, National Bureau, Statistics, Shanghai, NBS, BANK OF, ANZ, MIZUHO BANK, OF, OF ASIA FX, RBC, MUFG BANK, IG, SYDNEY, Friday's, BANK OF SINGAPORE, HSBC, stoke, Authorities, Reuters, U.S, Thomson Locations: U.S, SINGAPORE, ASIA, HONG KONG, SYDNEY, CHINA, SHANGHAI, OF ASIA, China

"The data suggests that China's post-COVID boom is clearly over," said Carol Kong, economist at Commonwealth Bank of Australia in Sydney. Authorities are likely to roll out more stimulus steps including fiscal spending to fund big-ticket infrastructure projects, more support for consumers and private firms, and some property policy easing, policy insiders and economists said. Most analysts say policymakers are likely to dole out modest supportive measures, instead of embracing any aggressive stimulus due to limited room and worries of growing debt risks, analysts said. For June alone, China's retail sales grew 3.1%, slowing sharply from a 12.7% jump in May, the data showed. Industrial output growth unexpectedly quickened to 4.4% last month from 3.5% seen in May, but demand remains lukewarm amid a bumpy post-COVID economic recovery.

Persons: Carol Kong, Alvin Tan, Kevin Yao, Ellen Zhang, Joe Cash, Shri Navaratnam Organizations: National Bureau, Statistics, Commonwealth Bank of Australia, Authorities, Asia FX, RBC Capital Markets, stoke, Thomson Locations: BEIJING, Shanghai, Sydney, China, Asia, Singapore

☆ China rolls over medium-term policy loans, rate unchanged
▼ + stars: | 2023-07-17 | by ( ) www.reuters.com time to read: +2 min

SHANGHAI/SINGAPORE, July 17 (Reuters) - China's central bank rolled over maturing medium-term policy loans and kept the interest rate unchanged as expected on Monday, however markets expect authorities will need to unleash more stimulus to support slowing economic growth. The People's Bank of China (PBOC) said it was keeping the rate on 103 billion yuan ($14.43 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.65%. In a Reuters poll conducted last week, market participants predicted no change to the MLF rate. Traders and analysts said the rate decision was well expected after the central bank lowered key policy rates last month. With 100 billion yuan worth of MLF loans set to expire this month, the operation resulted a net 3 billion yuan fresh fund injection into the banking system.

Persons: Goldman Sachs, Winni Zhou, Tom Westbrook, Kim Coghill, Sam Holmes Organizations: People's Bank of China, Traders, Communist Party, Goldman, Thomson Locations: SHANGHAI, SINGAPORE, United States, China

☆ China economic data likely to show recovery is fading quickly
▼ + stars: | 2023-07-16 | by ( ) www.reuters.com time to read: +4 min

Producer prices fell at the fastest pace in over seven years in June and consumer prices teetered on the verge of deflation, data showed earlier in the week. Authorities are likely to roll out more stimulus steps including fiscal spending to fund big-ticket infrastructure projects, more support for consumers and private firms, and some property policy easing, policy insiders and economists said. The central bank cut the RRR - the amount of cash that banks must hold as reserves - in March. China also cut its benchmark lending rates by a modest 10 basis points in June, the first such reduction in 10 months. But the central bank is likely to be wary of cutting lending rates further.

Persons: Kevin Yao, Kim Coghill Organizations: Reuters, Authorities, Thomson Locations: BEIJING, China, Beijing, COVID

☆ China central bank to use tools such as RRR to tackle economic woes
▼ + stars: | 2023-07-14 | by ( Kevin Yao | ) www.reuters.com time to read: +4 min

[1/2] Paramilitary police officers stand guard in front of the headquarters of the People's Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. The central bank will step up "countercyclical adjustments" to support the economic recovery, PBOC Deputy Governor Liu Guoqiang told the press conference. Analysts polled by Reuters expect the central bank to cut the RRR by 25 basis points in the third quarter. But Liu said China has not seen deflation and there were no deflationary risks for the second half. "As for the specific policy tools, we will use them reasonably according to the needs of the situation."

Persons: Tingshu Wang, Zou Lan, Zou, Liu Guoqiang, Liu, Liangping Gao, Ellen Zhang, Shri Navaratnam, William Mallard Organizations: People's Bank of China, REUTERS, Reuters, Securities Times, Thomson Locations: Beijing, China, BEIJING

☆ China's Q2 GDP seen rising 7.3% y/y but on low base, recovery fades: Reuters poll
▼ + stars: | 2023-07-13 | by ( Kevin Yao | ) www.reuters.com time to read: +4 min

Economic growth is likely to slow to 4.8% in the third quarter and 5.3% in the fourth, with full-year growth expected to reach 5.5%, the poll showed. China's central bank on Monday extended until the end of 2024 some policies which were unveiled in a November rescue package to shore up the real estate sector, including loan repayment extensions for developers. Analysts polled by Reuters expect the central bank to cut banks' reserve requirement ratio (RRR) by 25 basis points in the third quarter, while keeping benchmark lending rates steady. The central bank cut the RRR - the amount of cash that banks must hold as reserves - in March. But the central bank is likely to be wary of cutting lending rates further.

Persons: it's, Zhang Yiping, Li Qiang, Devayani Sathyan, Susobhan Sarkar, Jing Wang, Kevin Yao, Kim Coghill Organizations: Beijing, Reuters, Gross, China Merchants Securities, stoke, Thomson Locations: China, BEIJING, Bengaluru, Shanghai

Most economists expect another modest 10 bps LPR cut in the second half - on top of a 25 bps cut in banks' requirement ratio (RRR). The PROC last cut the RRR - the amount of cash that banks must hold as reserves -- in March, by 25 bps. Each 5 basis points LPR cut could reduce pre-tax profits of major banks by as much as 1.8%, China Merchants Securities said in a report. "A small rate cut is a useful painkiller for symptoms but cannot alleviate the real problem," said Gary Ng, Asia Pacific senior economist of Natixis. On Friday, China's cabinet discussed policy measures to support the economy.

Persons: COVID, NIM, Wang Yifeng, Wang, Gary Ng, China's, Zhang Ming, Zhang, Morgan Stanley, Kevin Yao, Ziyi Tang, Kripa Jayaram, Sumeet Chatterjee Organizations: People's Bank of China, Reuters, Everbright Securities, China Merchants Securities, Asia Pacific, stoke, Chinese Academy of Social Sciences, Thomson Locations: China, BEIJING, Beijing, Asia

☆ China cuts lending benchmarks to revive slowing demand
▼ + stars: | 2023-06-20 | by ( ) www.reuters.com time to read: +4 min

REUTERS/Thomas Peter/FILE PHOTOSHANGHAI/SINGAPORE, June 20 (Reuters) - China cut its key lending benchmarks on Tuesday, the first such reductions in 10 months as authorities seek to shore up a slowing economic recovery, although concerns about the property market meant the easing was not as large as expected. The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.55%, while the five-year LPR was cut by the same margin to 4.20%. The People's Bank of China (PBOC) lowered short- and medium-term policy rates last week. "There is no need to roll out all policy measures all at once." Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages.

Persons: Thomas Peter, Julian Evans, Pritchard, Xing Zhaopeng, Xing, China's, Bruce Pang, Jones Lang LaSalle, Winni Zhou, Tom Westbrook, Kripa Jayaram, Sam Holmes Organizations: Central Business, REUTERS, Capital Economics, Reuters, Mainland Properties, People's Bank of China, ANZ, Jones, Graphics, Thomson Locations: Beijing, China, SHANGHAI, SINGAPORE, outpacing

☆ China eyes support for consumer, private sectors as growth falters
▼ + stars: | 2023-06-15 | by ( Kevin Yao | ) www.reuters.com time to read: +5 min

China's cabinet is soliciting proposals from economists and advisers, policy insiders told Reuters, with big changes needing approval from top party leaders, and investors now looking to an expected Politburo meeting in July for clues on policy direction. However, the modest borrowing cost cuts - limited by concerns over banks' profitability and currency stability - will not be enough to boost economic activity, policy insiders said. Authorities are also considering support for the ailing property sector after earlier measures failed to gain traction, including easing credit conditions and home buying curbs in some areas, policy insiders. Economists blame the fading recovery on the "scarring effects" caused by COVID and regulatory curbs on property and tech sectors, which have hit household and private sector spending. Supporting depressed private-sector firms, which account for 60% of economic output and 80% of urban employment, will be essential to lift incomes, jobs and consumption, policy insiders and analysts said.

Persons: Rory Green, Jia Kang, Kevin Yao, Sam Holmes Organizations: quicken, Reuters, People's Bank of China's, TS Lombard, China Academy of New, Economics, Thomson Locations: BEIJING, China, Beijing

☆ China cuts medium-term loan rates as economy sputters, more easing expected
▼ + stars: | 2023-06-15 | by ( ) www.reuters.com time to read: +3 min

[1/2] Paramilitary police officers stand guard in front of the headquarters of the People's Bank of China, the central bank (PBOC), in Beijing, China September 30, 2022. Activity data to be released later on Thursday morning was expected to point to further weakness. The cuts could also pave the way for reductions in China's benchmark lending rates when they are set next Tuesday. With 200 billion yuan ($27.93 billion) worth of MLF loans set to expire this month, Thursday's operation resulted in a net 37 billion yuan ($5.17 billion) of fresh fund injection into the banking system. The central bank also injected 2 billion yuan ($279.14 million) through seven-day reverse repos at 1.9%, it said in an online statement.

Persons: Tingshu Wang, skidding, Goldman Sachs, Li Gu, Tom Westbrook, Kim Coghill Organizations: People's Bank of China, REUTERS, BNP, Barclays, Thomson Locations: Beijing, China, SHANGHAI, SINGAPORE, outflows, Shanghai, Singapore

☆ China opens a new era of 'proactive easing' as the economic recovery turns sour
▼ + stars: | 2023-06-14 | by ( Jihye Lee | ) www.cnbc.com time to read: +3 min

SHANGHAI, CHINA - NOVEMBER 04, 2022: Buildings at Lujiazui Financial District are illuminated to celebrate the opening ceremony of the 5th China International Import Expo (CIIE) on November 4, 2022 in Shanghai, China. Vcg | Visual China Group | Getty ImagesStock Chart Icon Stock chart iconPointing to soft economic figures from China, including credit data, Citi economists said "stimulus seems to be underway with the weak readings." Barclays economists, writing in a Tuesday note titled "Entering a rate cut cycle," predict China will deliver a cut for every quarter until early 2024. China's central bank controls the benchmark one-year lending and deposit rates, which affect the borrowing costs for banks, businesses and individuals across the country. Mizuho Bank's Head of Economics and Strategy for Asia Vishnu Varathan argued that the latest actions from China's central bank "does not cut it."

Persons: 50bp, Jian Chang, Goldman Sachs, Hui Shan, Asia Vishnu Varathan Organizations: Lujiazui Financial, 5th China, Visual China, Getty, Citi, Barclays, Bank's, Economics Locations: SHANGHAI, CHINA, Shanghai, China, Asia

"The central bank's rate cut decision was not a complete surprise to the market," said Ken Cheung, chief Asian FX strategist at Mizuho Bank. Further interest rate cuts in China would only widen the yield gap with the United States, even if the Fed pauses this week, sending the yuan lower and accelerating capital outflows. Tuesday's rate cut suggests policymakers are increasingly worried about the health of China's recovery, traders and analysts said. Bloomberg reported on Tuesday, citing unnamed sources, that China was considering at least a dozen stimulus measures including cuts to interest rates to support areas such as real estate and domestic demand. "There could be another RRR or policy interest rate cut in Q4, depending on the economic outcome over the next several months."

Persons: Ken Cheung, Yi Gang, Cheung, Marco Sun, Frances Cheung, Goldman Sachs, Winni Zhou, Tom Westbrook, Sam Holmes, Jacqueline Wong Organizations: People's Bank of China, Mizuho Bank, MUFG Bank, Bloomberg, OCBC Bank, Thomson Locations: SHANGHAI, SINGAPORE, China, United States, outflows

☆ Several Chinese lenders cut yuan deposit rates from Monday
▼ + stars: | 2023-06-12 | by ( ) www.reuters.com time to read: +2 min

BEIJING, June 12 (Reuters) - Several Chinese commercial banks cut interest rates on a range of yuan deposits from Monday, following their larger peers in a coordinated move to ease pressure on profit margins. The deposit rate cuts follow a similar move by China's biggest state lenders on Friday and marks the second such industry-wide cut within a year, with previous action taken in September. Analysts expect the deposit rate cuts will provide more room for a further cut soon by the central bank in the reserve requirement ratio (RRR) to expand credit and boost investment spending. The lenders cut rates on two-year time deposits by 10 bps points, and three-year and five-year time deposits by 15 bps points. The rate cuts will help ease pressure on lenders' profit margins as savings held in banks had ballooned when the economy slowed during COVID-19 lockdowns.

Persons: Yi Gang, Ziyi Tang, Ryan Woo, Sonali Paul Organizations: China's, China Merchants Bank Co Ltd, China Citic Bank Corp, China Minsheng Banking Corp Ltd, People's Bank of, Thomson Locations: BEIJING, Banks, China, People's Bank of China, Shanghai

☆ China's biggest state banks cut deposit rates
▼ + stars: | 2023-06-08 | by ( ) www.reuters.com time to read: +2 min

BEIJING, June 8 (Reuters) - China's biggest banks on Thursday said they have lowered interest rates on yuan deposits, in actions that could ease pressure on profit margins and reduce lending costs, providing some relief for the financial sector and wider economy. Industrial and Commercial Bank of China Ltd (601398.SS), Agricultural Bank of China Ltd (601288.SS), Bank of China Ltd (601988.SS) and China Construction Bank Corp (601939.SS) all cut their rates from Thursday, websites from each bank showed. The state-backed banks cut rates on demand deposits by 5 basis points and three-year and five-year time deposits by 15 basis points. China cut the RRR in March but has kept its benchmark lending rate unchanged this year, as widening yield differentials with the United States limited the scope for substantial monetary easing. Major state banks' net interest margins have shrunk following pressure to lower borrowing cost for individuals and businesses to stimulate the economy, and as credit demand remains subdued.

Persons: Gary Ng, Ng, Christopher Cushing, Sam Holmes Organizations: Industrial, Commercial Bank of China Ltd, Agricultural Bank of China Ltd, Bank of China Ltd, China Construction Bank Corp, Asia Pacific, United, People's Bank of China, CSI Banks, Beijing, Thomson Locations: BEIJING, China, Asia, United States

☆ China may cut rates further in H2, government researcher says
▼ + stars: | 2023-06-06 | by ( ) www.reuters.com time to read: +1 min

BEIJING, June 6 (Reuters) - China will likely further cut banks' reserve ratio and interest rates in the second half of this year to support the economy, the China Securities Journal reported on Tuesday, citing policy advisors and economists. China's economy rebounded faster than expected in the first quarter but lost momentum at the beginning of the second. Zhang Ming, a researcher at the Chinese Academy of Social Sciences, a top government think tank, told the state newspaper that low inflationary pressures in China will provide room for monetary easing. China can consider further rate cuts and target the reserve requirement ratio (RRR) cuts to lower lending costs, said Zhang. Li Chao, chief economist at Zheshang Securities, also expects potential rate cuts and RRR cuts in the second half of this year, the report said.

Persons: Zhang Ming, Zhang, Li Chao, Ziyi Tang, Ryan Woo, Shri Navaratnam Organizations: China Securities, Chinese Academy of Social Sciences, Zheshang Securities, U.S . Federal Reserve, United, Thomson Locations: BEIJING, China, Beijing, United States

☆ China's factory activity swings to surprise growth in May - Caixin PMI
▼ + stars: | 2023-06-01 | by ( ) www.reuters.com time to read: +3 min

The Caixin/S&P Global manufacturing purchasing managers' index (PMI) rose to 50.9 in May from 49.5 in April, above the 50-point index mark that separates growth from contraction. The reading surpassed expectations of 49.5 in a Reuters poll, a stark contrast to a deeper contraction activity seen in the official PMI released on Wednesday. The manufacturing subindexes showed factory output rose at the fastest clip in 11 months while new orders including new exports expanded in May. However, business confidence for the coming 12 months fell to a seven-month low amid concerns over global economic prospects. "Current economic growth lacks internal drive and market entities lack sufficient confidence, highlighting the importance of expanding and restoring demand, " said Wang Zhe, Senior Economist at Caixin Insight Group.

Persons: Zhou Hao, Hang, Wang Zhe, 25bps, Liangping Gao, Joe Cash, Ryan Woo, Sam Holmes, Simon Cameron, Moore Organizations: P Global, PMI, Guotai, CSI, Caixin Insight, ANZ, Thomson Locations: BEIJING, China

Refinitiv data shows foreigners sold $1.71 billion worth of mainland shares this month via Stock Connect, a key cross-border link between the mainland and Hong Kong exchanges, after selling $659 million in April. Despite outflows in February, April and May, foreigners' net purchases of mainland shares still stood at $25.05 billion for the first five months of this year, compared with net buying of about $6.36 billion worth over the whole of 2022. "Foreigners seem to have been selling because of the underwhelming near-term economic data points and, perhaps, because of the opportunities available to investors with a broader (pan-Asia or global) mandate," Pershad said. "We presume other investors have re-allocated some capital from China to those markets (and others) this year." Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Vidya Ranganathan & Simon Cameron-MooreOur Standards: The Thomson Reuters Trust Principles.

Persons: Pruksa Iamthongthong, Refinitiv, Alexander Davey, Vikas Pershad, Pershad, Patturaja Murugaboopathy, Gaurav Dogra, Vidya Ranganathan, Simon Cameron, Moore Organizations: Stock Connect, Reuters, National Bureau of Statistics, P Global, PMI, Morningstar, Allianz All China Equity WT, HK, HSBC Asset Management, U.S . Federal Reserve, G Investments, Thomson Locations: Hong Kong, China, Morningstar ,, Taiwan, Shanghai, Asia, Bengaluru

Summary Manufacturing PMI unexpectedly fallsNon-manufacturing PMI falls, as services slowPMIs show economic recovery losing steamMarkets skid on PMI weaknessBEIJING, May 31 (Reuters) - China's factory activity shrank faster than expected in May on weakening demand, heaping pressure on policymakers to shore up a patchy economic recovery and knocking Asian financial markets lower. "The PMI data reveal that China may heading to a K-shaped recovery," said Bruce Pang, chief economist at Jones Lang LaSalle. "The sluggish domestic demand could weigh on China's sustainable growth, if there are no efficient and effective policy moves to engineer a broad-based recovery," said Pang. The PMI subindexes for May showed factory output swung to contraction from an expansion while new orders, including new exports, fell for the second month. Last month, imports contracted sharply, factory gate prices fell, property investment slumped, industrial profits plunged and factory output and retail sales both missed forecasts.

Persons: Bruce Pang, Jones Lang LaSalle, Pang, Jones Lang LaSalle's Pang, Li Qiang, Zhiwei Zhang, Liangping Gao, Ryan Woo, Sam Holmes Organizations: PMI, National Bureau of Statistics, . Service, New, Jones, Labor, Nomura, Barclays, Thomson Locations: BEIJING, Asia, New Zealand, China, Japan

☆ China's disappointing rebound could bring in more stimulus, economists say
▼ + stars: | 2023-05-30 | by ( Elliot Smith | ) www.cnbc.com time to read: +5 min

Photographer: Qilai Shen/Bloomberg via Getty Images Qilai Shen | Bloomberg | Getty ImagesChina's much-vaunted economic rebound after its emergence from strict zero-Covid lockdown measures has yet to fully materialize, prompting some economists to speculate that further fiscal stimulus or monetary policy easing could be coming down the pipeline. Data from China's Bureau of Statistics shows that 6 million of the 96 million 16 to 24-year-olds in the urban labor force are currently unemployed. watch nowIn a research note Monday, Capital Economics assessed that, despite losing some momentum, China's economic recovery was still progressing at the start of the second quarter, with scope for further service sector-led improvement. But we do not expect policy rate cut or major fiscal stimulus, barring a precipitous fall in exports in the coming months." Any consensus among economists as to the trajectory of fiscal and monetary policy seems to be unraveling in light of the tenuous recovery.

☆ China holds lending rates steady; cautious on weak yuan, capital outflow risk
▼ + stars: | 2023-05-22 | by ( ) www.reuters.com time to read: +3 min

Earlier in the day, China's one-year loan prime rate (LPR) was kept at 3.65% and its five-year LPR was unchanged at 4.30%. In a Reuters poll of 26 market watchers conducted last week, 23 predicted no change to the rates for this month. "Within monetary policy, symbolic measures such as a reserve requirement ratio (RRR) cut are more likely than policy rate cuts this year given the already wide U.S.-China interest rate differential and RMB depreciation pressure." The steady LPR fixings also came after the PBOC rolled over maturing medium-term lending facility (MLF) loans while keeping the interest rate unchanged last week. "This can probably be achieved without policy rate cuts, which we think the PBOC will try to avoid," they said.

☆ China holds rates, adds more liquidity as recovery struggles
▼ + stars: | 2023-05-15 | by ( ) www.reuters.com time to read: +3 min

The People's Bank of China (PBOC) said it was keeping the rate on 125 billion yuan ($18.08 billion) worth of one-year medium-term lending facility (MLF) loans to some financial institutions unchanged at 2.75% from the previous operation. Monday's operation was meant to fully meet financial institutions' needs and to "maintain reasonably ample banking system liquidity," the PBOC said in an online statement. In a Reuters poll of 30 market watchers conducted last week, 26 participants, or 86.7%, predicted no change to the MLF rate, while four respondents expected a marginal rate cut. With 100 billion yuan worth of MLF loans set to expire this month, the operation resulted in a net 25 billion yuan fresh fund injection into the banking system. The central bank also injected 2 billion yuan through seven-day reverse repos while keeping borrowing costs unchanged at 2.00%, it said in an online statement.

The consumer price index (CPI) in April rose 0.1% year-on-year, the lowest rate since February 2021, and cooling from the 0.7% annual gain seen in March, the National Bureau of Statistics (NBS) said. Reuters GraphicsPBOC TESTEDOverall inflationary pressures remain low with the core consumer inflation, which excludes volatile food and energy prices, up 0.7%, unchanged from the previous month. The statistics bureau attributed the weaker consumer inflation to the base effect. Vegetable prices extended their decline to 13.5% and pork, a major driver of CPI, slowed its price growth to 4.0% from 9.6% in March. "Securing income growth and improving consumer confidence remain key policy priorities for delivering a more sustainable consumption recovery," said Pang.

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