China Cuts Interest Rate as Growth Risks Worsen With Omicron

the latest tech news, global tech news daily, tech news today, startups, usa tech, asia tech, china tech, eu tech, global tech, in-depth electronics reviews, 24h tech news, 24h tech news, top mobile apps, tech news daily, gaming hardware, big tech news, useful technology tips, expert interviews, reporting on the business of technology, venture capital funding, programing language

(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Most Read from Bloomberg

    the latest tech news, global tech news daily, tech news today, startups, usa tech, asia tech, china tech, eu tech, global tech, in-depth electronics reviews, 24h tech news, 24h tech news, top mobile apps, tech news daily, gaming hardware, big tech news, useful technology tips, expert interviews, reporting on the business of technology, venture capital funding, programing language

    China’s central bank cut its key interest rate for the first time in almost two years to help bolster an economy that’s lost momentum because of a property slump and repeated virus outbreaks.

    In a stark policy divergence with other major economies, the People’s Bank of China lowered the rate at which it provides one-year loans to banks by 10 basis points — the first reduction since April 2020.

    Global Tech News Daily

    While inflation is the dominant concern for central bankers in the U.S. and Europe, China’s relatively stable prices mean policy makers have shifted to boosting growth. Official data Monday showed gross domestic product rose 4% last quarter from a year earlier, the weakest since early 2020.

    Read More: China Becomes First Central Bank to Cut Rates in 2022: Map

    Global Tech News Daily

    The rate cut is part of Beijing’s efforts to put a floor under growth in a crucial year of leadership transition for the world’s second-largest economy. The biggest challenges to meeting that goal are sporadic outbreaks of the more-infectious omicron coronavirus variant, and continued falls in property sales reducing housing investment.

    Housing sales remained low in December, while consumer spending slowed sharply as the government tightened virus controls. An outbreak of omicron-variant virus cases in January, including in Beijing over the weekend, will further curb sentiment.

    “Consumption remains the weakest link in China’s growth story at the moment and that will by and large continue for much of this year,” said Louis Kuijs, head of Asia economics at Oxford Economics. “We think Beijing has a bottom line of around 5%. As is the case at the moment, if growth is weaker than that, they’d feel strongly motivated to pursue more policy easing.”

    Economists expect more policy action from the PBOC in coming months. Goldman Sachs Group Inc. said there’s a possibility the central bank will allow banks to lower the five-year loan prime rate, a reference for mortgages, on Thursday. The one-year rate was already cut in December. Economists at Australia & New Zealand Banking Group and BNP Paribas see the likelihood of further reductions in the reserve requirement ratio for banks.

    Read More: PBOC Seen Cutting Rates Further, Lowering RRR to Boost Economy

    For the full year, China’s economy expanded 8.1%, well above the government’s target of “over 6%,” due in part to the low base of growth in 2020. Last year Beijing took advantage of that as well as strong overseas demand, to try and remake its economy: reining in large technology platform companies and trying to squeeze financing to real-estate companies to reduce the economy’s reliance on property development, which accounts for as much as 20% of GDP.

    The financing squeeze led to a 11.4% fall in the area of new projects started by real-estate developers last year, dragging down production of commodities like steel and cement. Property investment dropped 14% in December from a year earlier, according to Bloomberg calculations based on full-year government figures.

    “The property sector’s drag on fixed asset investment is quite stark and shocking,” said Liu Peiqian, China economist at NatWest Group Plc.

    Consumption returned to growth after a historic decline in 2020, and accounted for the bulk of last year’s economic expansion, although the pace of consumer spending growth was below pre-pandemic levels. The record trade surplus of $676 billion last year accounted for about one fifth of full-year growth.

    Along with the rate cut, the PBOC also injected more liquidity by offering 700 billion yuan ($110 billion) of one-year loans, exceeding the 500 billion yuan maturing, and added 100 billion yuan with seven-day reverse repos, more than the 10 billion due. The bank also lowered its seven-day reverse repurchase rate to 2.1% from 2.2%.

    What Bloomberg Economics Says…

    The People’s Bank of China’s bigger-than-expected cut to the one-year medium-term lending facility rate shows it’s serious about putting a prop under the economy. The move suggests banks will quote a lower one-year Loan Prime Rate at Thursday’s fixing for a second month in a row — providing more support for a slowing economy.

    Chang Shu and David Qu

    For the full report, click here

    Chinese stocks rose following the rate cuts, with the benchmark CSI 300 Index up as much as 1% after falling in the previous two days. The yield on 10-year sovereign bonds trimmed its drop to 1 basis point to 2.78% as of 2:10 p.m. local time, after falling 3 basis points in response to the rate reductions.

    The interest rate cuts were the latest in a string of growth-supporting moves by Beijing. Policy makers have stepped up the issuance of bonds used by local governments to fund infrastructure, and told banks to accelerate lending to property companies to reduce the risk of a hard landing for the housing market.

    Bruce Pang, head of macro and strategy research at China Renaissance Securities Hong Kong, forecasts the PBOC will cut the reserve requirement ratio for banks by 100 basis points this year, but sees no more rate cuts unless economic growth significantly lags expectations.

    “The interest rate cut has laid a good foundation ahead of the Lunar New Year to stabilize expectations, but going forward it will require the combination of fiscal, industrial and employment policies to boost growth,” he said.

    (Updates with expectations of further policy action.)

    Most Read from Bloomberg Businessweek

      ©2022 Bloomberg L.P.

      News Related

      OTHER NEWS

      New York Rangers get another comeback win to force Game 7 vs. Pittsburgh Penguins

      PITTSBURGH — How many times can the New York Rangers dig themselves into a hole and climb back out? At least one more, as of Friday night. The Blueshirts came ... Read more »

      Wilson, balanced Aces cruise to 96-73 victory over Dream

      COLLEGE PARK, Ga. (AP) — A’ja Wilson scored 15 points, Kelsey Plum had 14 points and 11 assists and the Las Vegas Aces rolled to a 96-73 victory over the ... Read more »

      EXPLAINER: Why frustration lingers in Okinawa 50 years later

      The Associated PressFILE – U.S. Marine Corps Sgt. Mike Anglen of Turner, Ore., center, stands atop a cliff as Sgt. Bryan Wallace of Pikin, Ill., waits for his turn before ... Read more »

      Astros beat Nationals 6-1 for 11th straight victory

      WASHINGTON (AP) — Jose Altuve homered on the first pitch of the game, Yordan Alvarez and Yuli Gurriel also went deep and the Houston Astros extended their winning streak to ... Read more »

      Kreider scores late, Rangers edge Pens 5-3 to force Game 7

      PITTSBURGH (AP) — Chris Kreider’s long slap shot bounced over Louis Domingue and into the net with 1:28 left and the New York Rangers beat the Pittsburgh Penguins 5-3 on ... Read more »

      Astros push winning streak to 11, roll past Nationals 6-1

      WASHINGTON (AP) — Jose Altuve homered on the first pitch of the game, and Yordan Alvarez and Yuli Gurriel also went deep to help the Houston Astros extend their winning ... Read more »

      Moustakas, Drury power Reds to 8-2 victory over Pirates

      PITTSBURGH (AP) — Mike Moustakas homered twice and Brandon Drury drove in four runs to break out of a slump and lead the resurgent Cincinnati Reds to an 8-2 victory ... Read more »

      Peterson's bases-loaded walk lifts Brewers over Marlins 2-1

      MIAMI (AP) — Jace Peterson walked against Anthony Bender with the bases loaded in the ninth inning and the Milwaukee Brewers beat the Miami Marlins 2-1 Friday night. After starters ... Read more »

      Padres: No cancer found during manager Bob Melvin's prostate surgery

      SAN DIEGO (AP) — The San Diego Padres say no cancer was found when manager Bob Melvin had prostate surgery on Wednesday. Melvin, 60, was recovering at home Friday after ... Read more »

      Ogunbowale, Gray help Wings rally past Mystics, 94-86

      WASHINGTON (AP) — Arike Ogunbowale scored 27 points, Allisha Gray had 21 and the Dallas Wings overcame a 15-point second-quarter deficit to beat the Washington Mystics 94-86 on Friday night. ... Read more »

      Resigning North Dakota senator led lawmakers in travel costs

      The Associated PressFILE – North Dakota Sen. Ray Holmberg listens during a joint House and Senate Appropriations Committee meeting at the Capitol in Bismarck, N.D., on Jan. 7, 2009. Holmberg, ... Read more »

      Residents in picturesque California county hit with gas prices topping $7 a gallon

      A California county known for its spectacular mountains and proximity to Yosemite National Park has been paying the nation’s highest gas prices. Read more »

      Boudreau to return as coach of Canucks next season

      VANCOUVER, British Columbia (AP) — Bruce Boudreau will return as coach of the Vancouver Canucks next season after helping to turn the struggling NHL club around as a midyear replacement. ... Read more »

      New Zealand leader Jacinda Ardern tests positive for COVID

      On Location: May 13, 2022 Catch up on the developing stories making headlines.The Associated Press WELLINGTON, New Zealand — New Zealand Prime Minister Jacinda Ardern has tested positive for COVID-19 ... Read more »

      Today in History for May 14th

      Highlights of this day in history: Colonists go ashore in Virginia to set up Jamestown; Lewis and Clark begin to explore Louisiana Territory; Israel founded; Skylab launched; Movie producer George ... Read more »

      Twitter CEO expects Elon Musk acquisition to close, addresses spending cuts

      Musk is awaiting details supporting calculations that spam, fake accounts represent less than 5% of Twitter's users Read more »

      Padres: No cancer found during Bob Melvin's prostate surgery

      SAN DIEGO (AP) — The San Diego Padres say no cancer was found when manager Bob Melvin had prostate surgery on Wednesday. Melvin, 60, was recovering at home Friday after ... Read more »

      Renovated NYC museum shows indigenous perspectives

      The American Museum of Natural History in New York City recently finished a major renovation of its exhibition on the native peoples of the northwest coast of North America. Curators ... Read more »

      Police release 911 calls in Gilgo Beach case

      A woman who disappeared in a beach community on New York’s Long Island more than a decade ago, sparking an investigation into a possible serial killer, said “there’s somebody after ... Read more »

      Academy Awards set 2023 Oscars for March 12

      The Associated PressFILE – Oscar statue on the red carpet at the Oscars on Sunday, March 27, 2022, at the Dolby Theatre in Los Angeles. Next year’s Academy Awards will ... Read more »

      Actor Fred Ward, of 'Tremors,' 'The Right Stuff' fame, dies

      The Associated PressFILE – Fred Ward, a cast member in “30 Minutes or Less,” poses at the premiere of the film in Los Angeles on Aug. 8, 2011. Ward, a ... Read more »

      Judge refuses to drop elections suit against Trump, media

      NEW YORK — A Colorado judge on Friday denied motions to dismiss a defamation lawsuit filed by an election systems worker against former President Donald Trump’s campaign, two of its ... Read more »

      Q&A: Becky G unveils every side of herself in latest album

      The Associated PressFILE – Becky G appears at the Oscars in Los Angeles on March 27, 2022. Beck G’s latest album is “Esquemas.” (AP Photo/Jae C. Hong, File) NEW YORK ... Read more »

      North Korea reports 21 new deaths as it battles COVID-19 outbreak

      SEOUL, South Korea — North Korea reports 21 new deaths as it battles COVID-19 outbreak. Read more »

      North Korea confirms 21 new deaths as it battles COVID-19

      SEOUL, South Korea — North Korea says 21 people died and 174,440 people were newly found with fever symptoms on Friday alone as the country scrambles to slow the spread ... Read more »

      White Sox place Giolito on COVID list, activate Vaughn

      The Chicago White Sox placed ace Lucas Giolito on the COVID-19 injured list and activated outfielder Andrew Vaughn following a rehab assignment with Triple-A Charlotte on Friday. Giolito began experiencing ... Read more »

      Traded back and forth, Ford learns to live out of suitcase

      NEW YORK (AP) — Mike Ford has learned to travel light — and quickly. Since the start of the season, the 29-year-old first baseman has played for Tacoma, San Francisco ... Read more »

      Falcon 9 rocket launches Starlink satellites

      A SpaceX Falcon 9 rocket launched 53 Starlink satellites to low-Earth orbit from California on Friday. (May 13) Read more »

      Celtics' Robert Williams remains out for Game 6 vs. Bucks

      MILWAUKEE (AP) — Boston forward/center Robert Williams missed his third straight game with an injured left knee as the Celtics tried to keep their season alive Friday night in Game ... Read more »

      Padres sign Robinson Canó, plan to use him off the bench

      ATLANTA (AP) — The San Diego Padres have signed veteran second baseman Robinson Canó to a major league contract and plan to use him as a left-handed bat off the ... Read more »

      WNBA star's Russia detention extended by 1 month

      The lawyer for WNBA star Brittney Griner says her pre-trial detention in Russia has been extended by one month. Alexander Boykov told The Associated Press the relatively short extension indicated ... Read more »

      Louisiana justices toss COVID-related charges against pastor

      Hundreds of thousands of Americans fighting long-haul symptoms from COVID-19 Dr. David Putrino from Mount Sinai Health System and COVID long-hauler Joel Fram discuss the long-term effects of the disease.The ... Read more »

      Sandy Hook lawsuits against Alex Jones on track to resume

      The Associated PressFILE – This Tuesday, Dec. 11, 2018, photo shows radio show host and conspiracy theorist Alex Jones at Capitol Hill in Washington. The Sandy Hook families’ lawsuits against ... Read more »

      Rockies' Bryant closer to return after cortisone shot

      DENVER (AP) — Colorado Rockies outfielder Kris Bryant took swings in the cage Friday for the first time since he was sidelined with a sore back nearly three weeks ago ... Read more »

      Mariners demote Jarred Kelenic to minors after poor start

      NEW YORK (AP) — Rather than make his Citi Field debut against the team that traded him, Jarred Kelenic was demoted to Triple-A Tacoma by the Seattle Mariners on Friday ... Read more »

      Biden: ASEAN partnership 'critical' in this moment

      Looking to strengthen ties, President Joe Biden welcomes leaders from the Association of Southeast Asian Nations to Washington for the first time. “We’re launching a new era in U.S.-ASEAN relations,” ... Read more »

      Phil Mickelson will not defend his title at next week's PGA Championship

      Phil Mickelson caught lightning in a bottle last year at Kiawah Island, winning a major championship at 50 years of age. The fairways flooded, and the golf world stood and ... Read more »

      Tennessee Titans' Malik Willis on Ryan Tannehill's mentorship comments: 'Everything is cool'

      The Tennessee Titans didn’t take issue with Ryan Tannehill’s comments about mentoring third-round rookie Malik Willis. Willis and coach Mike Vrabel were asked about Tannehill’s scrutinized remarks following the first ... Read more »

      Lawyers plan suit against Lufthansa over Jewish passengers

      Lawyers for 26 passengers said Friday they told Lufthansa that they will sue the German airline for refusing to let members of a large group of Orthodox Jewish passengers board ... Read more »

      Wild face offseason after yet another early ouster

      While the Minnesota Wild were stacking up franchise records and securing the extra home game for the first round, general manager Bill Guerin carefully acknowledged a “great year” for the ... Read more »