Interest rates lowered: China braces itself against the economic downturn

Beijing reports growth for July - but this was significantly lower than expected.

Interest rates lowered: China braces itself against the economic downturn

Beijing reports growth for July - but this was significantly lower than expected. The country now wants to stimulate the economy with lower interest rates. So far, however, the management has not changed anything about the reason for the restrained development: the zero-Covid strategy remains.

In China, important economic data again fell short of expectations in July. As reported by the Beijing Statistics Office, Chinese industrial production grew 3.8 percent over the year, more slowly than analysts had expected. Retail sales growth, a key indicator of consumption, also slowed in July. Here, too, the market forecasts were clearly undershot.

In order to give the economy new impetus, China's central bank surprisingly lowered the interest rate for one-year refinancing transactions with banks on Monday for the first time since January. This fell ten basis points to 2.75 percent.

The economy is suffering from the fact that Beijing is not moving away from its "zero corona policy". The aim of this is to nip any outbreak in the bud. Numerous megacities had imposed strict measures, especially in spring, to prevent the spread of the highly contagious omicron variant. Problems in the real estate market are also weighing on growth in China.

The Chinese economy is surprising on the downside, according to Maybank analysts. The lower interest rates are also likely to inspire little confidence amid headwinds from the zero-Covid policy and the housing market crisis.

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