1/6
"Cutting deposit rates marks the latest attempt to revive economic growth in China, where policymakers are struggling to contain the fallout from disruptive Covid-19 lockdowns and a liquidity crisis cascading through the property sector."
ft.com
"Cutting deposit rates marks the latest attempt to revive economic growth in China, where policymakers are struggling to contain the fallout from disruptive Covid-19 lockdowns and a liquidity crisis cascading through the property sector."
ft.com
2/6
This newest measure mostly suggests just how urgently regulators and financial policymakers may want to be seen "doing something". The article cites analysts who claim, for example, that cutting deposit rates is a "stealth approach to pushing down lending ratesβ.
This newest measure mostly suggests just how urgently regulators and financial policymakers may want to be seen "doing something". The article cites analysts who claim, for example, that cutting deposit rates is a "stealth approach to pushing down lending ratesβ.
3/6
But regulators have lowered lending rates directly, with little impact on business investment. The problem facing Chinese businesses is not scarce capital but rather weak demand, in which case lower rates don't help, especially when lending is decided administratively.
But regulators have lowered lending rates directly, with little impact on business investment. The problem facing Chinese businesses is not scarce capital but rather weak demand, in which case lower rates don't help, especially when lending is decided administratively.
4/6
Ironically, lower deposit rates may actually put downward pressure on demand by reducing the return on household savings. With total deposits adding up to over 210% of GDP, of which more than half are household deposits, 15 bps is not negligible.
global.chinadaily.com.cn
Ironically, lower deposit rates may actually put downward pressure on demand by reducing the return on household savings. With total deposits adding up to over 210% of GDP, of which more than half are household deposits, 15 bps is not negligible.
global.chinadaily.com.cn
5/6
While lowering the deposit rate relieves pressure on lending spreads for the banks β and banks are certainly experiencing loan problems β their straitened circumstances are really not the most urgent problem for the Chinese economy.
While lowering the deposit rate relieves pressure on lending spreads for the banks β and banks are certainly experiencing loan problems β their straitened circumstances are really not the most urgent problem for the Chinese economy.
6/6
What China really needs is stronger consumption, and this becomes all the more urgent if export growth drops over the rest of this year, as many expect. It is hard to see how lowering the returns households receive on their deposits will help.
What China really needs is stronger consumption, and this becomes all the more urgent if export growth drops over the rest of this year, as many expect. It is hard to see how lowering the returns households receive on their deposits will help.
Loading suggestions...