China rate cut raises fears of grim May economic data

Global cheers over China’s decision to cut interest rates could fade to stony silence if, as some economists fear, the move signals that some grim economic data are about to be released.

China’s surprise rate cut unveiled on Thursday has boosted hopes that cheaper credit will help combat its faltering economic growth and has encouraged global share markets in their belief that the major economies are stepping up stimulus.

But the central bank’s cut, the first since the global financial crisis in late 2008, has also raised concerns about a deluge of May Chinese data due this weekend.

Reuters polls published earlier in the week suggested the world’s second-largest economy probably showed signs of stabilizing last month from a surprisingly weak April. Now, some economists worry that those expectations may be misplaced.

“The concern is that with industrial production and CPI data coming out ofChina at the weekend that it’s indicative of them knowing something about weak data going forward,” said Adrian Schmidt, currency strategist at Lloyds Bank in London.

The outlook was already looking grim by Chinese standards.

Analysts forecast in a Reuters benchmark poll in May that China would deliver its weakest quarter of growth in three years in the second quarter at 7.9 percent. It would also mark the sixth straight quarter of slowing growth.

They expected 2012 full-year expansion of 8.2 percent, a pace that industrial nations would envy but would be the weakest outcome for China since 1999.

The People’s Bank of China (PBOC) cut the official one-year borrowing rate by 25 basis points to 6.31 percent and the one-year deposit rate by a similar amount to 3.25 percent in an announcement after Asian markets closed on Thursday.


probably the most significant announcement of the week..the first time in 4 cut when your economy is running out of steam..and it got little coverage in the tv news..they are more interested in subjective growth figures ..this is reality..


~ by seeker401 on June 9, 2012.

One Response to “China rate cut raises fears of grim May economic data”

  1. Jct: Any cut in the death rate on the mort-gage contract is good news. New collateral-backed money fights inflation (thought they don’t know about shift B).

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