Last week’s “third plenum” of China’s Communist Party may have disappointed with its lack of any plans for large-scale stimulus, but its central bank has done its little bit to support a sluggish economy with an unexpected interest rate cut.
While there was a passing mention of the need to “refine long-term mechanisms for expanding consumption” and another to “actively expanding domestic demand” the “resolution” didn’t detail those mechanisms, let alone announce any near term measures for boosting consumption.
The People’s Bank of China cut two key policy rates by 10 basis points, its first rate reduction in nearly six months.With domestic confidence and consumption weak there is significant excess capacity within China’s industrial base, leading to increased volumes of exports at decreasing prices, hence the growing concern and backlashes within its offshore markets.
At the centre of China’s current economic challenges is the continuing implosion of its property sector, where prices continue to fall and more than 20 million apartments remain incomplete after the country’s developers have fallen over like dominoes.