China’s determination to reinvigorate its economy has seen the People’s Bank of China cut its 1 year lending rate from 4.60% to 4.35%. In addition, it reduced the reserve cash requirements for all banks by at least 50bps, with some bank reductions up to 100bps or 1.00%.
Facing the weakest growth in two decades and anticipating further stimulus measures from the ECB and Japan, the PBoC moved quickly over the weekend to make the adjustments. China has seen producer prices easing and recent GDP growth data has been disappointing. While GDP was released at 6.9%, slightly higher than market expectations, few outside the country believe the figure and even point to the fact that the GDP number benefited from a surge in financial services activity as a result of the huge increase in share trading activity over the past year. A surge that is unlikely to be repeated.