China is cutting rates and seeking a stimulus package to revive the economy

• China has cut short-term interest rates in its economy to 1.9%.
• Meanwhile, the government is mulling a massive stimulus package to prop up key sectors.
• This comes as the country makes a disappointing recovery as it rolls back zero-covid policies.

China’s central bank has cut short-term interest rates and is rolling out a big monetary stimulus package — signs that the country is trying to revive economic activity amid a slowdown that fueled forecasts of a red-hot recovery after pandemic lockdowns.

Short-term interest rates in China were cut to 1.9% from 2% on Tuesday, a step down Notice From the People’s Bank of China, it marks the first interest rate cut by China’s central bank since August last year.

The PBOC pumped 2 billion yuan, or $280 million, into the country’s banking system — another form of demonetization aimed at boosting liquidity in the economy.

Meanwhile, China’s government is considering a massive economic stimulus package. Bloomberg The report cited people familiar with the matter. The package includes more than a dozen proposals, including demand and the use of stimulus money to boost China’s real estate market — two areas that have particularly struggled since the country’s economy reopened.

It comes as China closes the book on zero-Covid lockdown policies, which are expected to spur a rebound in its economy. But economic activity has fallen sharply in 2023, with key sectors struggling as consumer demand falls short of expectations. According to the latest figures, Chinese manufacturing activity continued to contract in May, while home sales fell 14.3%.

In April, PBOC Governor Yi Gang said he still believed China could meet its target 5% GDP growth this yearBut some experts are skeptical of that future, especially as the country is saddled with high levels of debt and faces the risk of deflation in its economy.

According to Rockefeller International president Rusir Sharma, this makes the narrative that China will have a major economic recovery just „disgusting”. Meanwhile, former International Monetary Fund official Desmond Lachman said China could be headed for a lost decade as its economy is unlikely to recover from its COVID-era restrictions anytime soon.