- China's government think-tank
People's Bank of China and the Chinese government are ready to slash interest rates again as well as loosing lending restrictions, as they are getting increasingly concerned that falling prices might prompt a surge in debt defaults, business failures and job losses. The authorities are also worried about China's economic growth rate, as growth slowed to 7.3% in the third quarter and the nation's economy is seen expanding around 7% in 2014, well below the official projection of 7.5%. Moreover, the fear of a increasing unemployment rate could be also behind the potential decision to support the economy with lower borrowing costs. Last week the PBoC unexpectedly cut its one-year lending rate by 40 basis points to 5.6% and the one-year deposit rate by 25 basis points to 2.75%.
Many Chinese economists had been urging policy makers to deploy bolder policy actions, as recent fundamentals showed the economy losing more steam in the fourth quarter and consumer price inflation declining. Government think-tanks, which make policy proposals, have also prompt Beijing to revise its economic growth goal next year, probably to around 7%, from 7.5% this year. The leadership is scheduled to map out economic and reform plans for 2015 next month, including economic targets which will be unveiled in parliament next March.
© Dukascopy Bank SA