The People’s Bank of China yesterday cut a key interest rate and pumped billions of yuan into financial markets, as fresh data showed the world’s second-largest economy was flagging.
China’s central bank lowered the medium-term lending facility rate — the interest for one-year loans to financial institutions — 10 basis points to 2.65 percent, it said in a statement.
The bank said it was offering 237 billion yuan (US$33 billion) to banks through the medium-term lending facility, “to maintain reasonable and sufficient liquidity in the banking system.”
Photo: AFP
The announcement came two days after it unveiled a surprise cut in a short-term interest rate, which analysts said reflected growing concern about the state of the economy among Chinese policymakers.
The medium-term lending facility rate guides the benchmark lending rate for households, businesses and mortgages.
A lower medium-term lending facility rate reduces commercial banks’ financing costs, which encourages them to lend more and potentially boost domestic consumption.
A number of lackluster economic indicators in recent weeks have suggested that the country’s post-COVID-19 recovery is running out of steam.
Inflation rose only 0.2 percent year-on-year last month, while factory activity contracted for the second consecutive month.
In another sign of weakness yesterday, figures showed youth unemployment rose to a record 20.8 percent last month.
The unemployment rate for Chinese aged 16 to 24 was up from what was already a record 20.4 percent in April, the Chinese National Bureau of Statistics said.
Meanwhile, industrial production growth slowed to 3.5 percent from 5.6 percent a month earlier, as factories gradually returned to full capacity.
Retail sales, the main indicator of household consumption, rose 12.7 percent year-on-year, compared with 18.4 percent a month earlier.
Exports sank last month for the first time since February, breaking a two-month growth streak.
The Chinese economy is weighed down by a debt-laden property sector and a global economic slowdown.
“All the data points so far sent consistent signals that the economic momentum is weakening,” Pinpoint Asset Management Ltd (保銀私募基金管理) president Zhang Zhiwei (張智威) said in a note yesterday.
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