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π¨π³ China lowered interest rates: unexpected but logical
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π¦ The People's Bank of China disappointed analysts and cut the medium-term lending rate, at which it provides annual loans to the banking system, by 10 basis points. China's economy barely dodged a contraction in the second quarter, as it struggles with a series of damaging lockdowns. Despite the economic impact of the lockdowns, Beijing appears hesitant to scale back its strict zero-COVID policy.
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Official statistics showed consumer and manufacturing activity worse than expected, as the pace of the country's economic recovery after large-scale lockdowns is slowing down. Retail sales grew by just 2.7%, while industrial production, which was the driving force behind growth at the start of the pandemic, rose 3.8% in July. Analysts had forecast growth of 5% and 4.6%, respectively.
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Another critical indicator - youth unemployment - showed an Β«anti-recordΒ» (19.9%), which increases political pressure on the Xi Jinping administration. Politicians have begun to argue about over-stimulating the economy with too much liquidity, although the real risk is a slow pace of economic recovery.
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In addition to endless quarantines, the world's second economy is also suffering from a crisis in the real estate market: developers simply do not have enough money to complete projects. China intends to expand the use of special local government bonds and new loan guarantees (about 3.45 trillion yuan). On this information, the shares of some players in the Chinese real estate market have already grown by 10-15%, although it is unlikely that they will be able to maintain new levels since the incentive plan provides for gradual investments over three years.
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An economic slowdown in China will lead to a looser monetary policy, but most experts are pessimistic about the scale and speed of Beijing's response. Let's see what happens.
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Profits to yβall!