2012-06-11marketwatch.com

While a 25-basis-point cut, together with steps towards interest-rate deregulation should be good news, instead it left investors feeling distinctly uncomfortable. One fear is that rather than boosting lending, the move instead risks weakening mainland Chinese banks as the economy faces a critical juncture.

...

If there is a policy failure, arguably it stems from authorities' inability to get banks to ramp up lending, despite three required-reserve-ratio (RRR) cuts in the past six months. This move acts to free up more banks funds for lending.

...

According to Capital Economics, at most points in the past, the value of Chinese rate cuts was entirely in their impact on sentiment. With benchmark lending rates so low relative to expected investment returns, lending was typically rationed by quota rather than price.



Comments: Be the first to add a comment

add a comment | go to forum thread