Logo of Phnom Penh Post newspaper Phnom Penh Post - China slashes rate, pumps $7B into market

China slashes rate, pumps $7B into market

Content image - Phnom Penh Post
The People's bank of China's move is the latest by global central banks who are looking to limit the impact of the coronavirus. AFP

China slashes rate, pumps $7B into market

China's central bank on Monday cut an interest rate on loans to banks by the largest margin in five years and injected 50 billion yuan ($7 billion) into the financial system to help the world’s second-largest economy weather the coronavirus impact.

The People’s Bank of China (PBoC) said it launched a 50-billion-yuan reverse repurchase operation on Monday and lowered the seven-day reverse repurchase rate from 2.40 per cent to 2.20 per cent.

It was the “largest cut since 2015 and takes the seven-day reverse repo rate to its lowest on record”, said Julian Evans-Pritchard, senior China economist at Capital Economics.

“By offering funds at a lower rate, the PBoC will be able to keep market interbank rates low even as the liquidity from the RRR [reserve requirement ratio] cuts is absorbed by the banking system,” he said, referring to an earlier lowering of the amount of cash lenders must keep in reserve.

The deadly pathogen has claimed almost 40,000 lives worldwide, hitting businesses and consumers, and its global spread has dampened hope of a quick recovery in export-dependent China, where the pandemic first erupted in December.

The latest move comes as governments and central banks around the world ease monetary policy and unveil titanic stimulus measures worth around $5 trillion to counter the economic impact of the pandemic, which forecasters warn will cause a deep recession.

The Communist Party’s decision-making politburo on Friday also called for stronger counter-cyclical policy measures and a step-up in stimulus.

The politburo said where appropriate, the fiscal deficit ratio should be raised, special treasury bonds should be issued, and that there should be an increased quota of local government special bond issuance, China’s official Xinhua News Agency reported.

Effective loan rates should also be guided down, “maintaining reasonable and sufficient liquidity”, officials added.

Monday’s move appears to have had little impact on market sentiment, with Shanghai’s key stock index about one per cent lower in the afternoon.

As Covid-19 ravages the global economy, analysts have cut growth forecasts for China, which was the first to see the effects from containment measures aimed at halting its spread.

S&P Global Ratings said its revised economic growth estimate for China this year is now almost half its pre-outbreak growth assumption of 5.7 per cent.

ANZ Research economists Xing Zhaopeng and Raymond Yeung said in a note that the PBoC’s rate cut “is intended to lower Chinese corporates’ funding costs”.

They expect it will be followed by cuts in the medium term lending facility rates and loan prime rate.

MOST VIEWED

  • Seven positive for Covid-19, Hun Sen confirms local transmission

    Prime Minister Hun Sen announced that there has been local community transmission of Covid-19. However, he urged the people not to panic even though the Ministry of Health announced the discovery of seven new cases on Sunday. Among the victims are Chhem Savuth, the director-general

  • Cambodia at ‘most critical moment’, Hun Sen warns

    Prime Minister Hun Sen said the first community transmission of Covid-19 in Cambodia has led the country to the “most critical moment” that warranted urgent, large-scale operations to contain the pandemic. Hun Sen, who confirmed the first local transmission on November 28, said the source of

  • PM confirms community transmission, calls for unity

    Prime Minister Hun Sen has called on the public to stay calm, unite and follow the Ministry of Health guidelines after the wife of a senior official tested positive for Covid-19 in the Kingdom’s first case of community transmission. The case has drawn criticism

  • Over 110 garment factories close

    A government official said on November 22 that at least 110 garment factories had closed in the first nine months of the year and left more than 55,000 workers without jobs – but union leaders worry those numbers could be much higher. Ministry of Labour and Vocational Training undersecretary

  • Singapore group seeks $14M in damages from PPSP over ‘breach of contract’

    Singapore-based Asiatic Group (Holdings) Ltd is seeking a minimum of $14.4 million relief from Cambodia Securities Exchange (CSX)-listed Phnom Penh Special Economic Zone Plc (PPSP) for allegedly breaching a power plant joint venture (JV) agreement. Asiatic Group’s wholly-owned Colben System Pte Ltd and 95 per

  • PM vows to protect Hun family

    Prime Minister Hun Sen has vowed to continue his fight against opposition politicians who he said intend to smash the Hun family. Without naming the politicians but apparently referring to former leaders of the Supreme Court-dissolved Cambodia National Rescue Party (CNRP), Hun Sen said there