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PBOC Lowers Lending Rate, and Lowers Deposit Rate Even More. [Copy link] 中文

Rank: 8Rank: 8

Post time 2015-5-10 18:54:52 |Display all floors
Overnight, China has lowered its lending rate from 5.35% to 5.10%, an absolute decrease of 0.25%, while at the same time also lowering the deposit rate from 2.50% to 2.25%, an absolute decrease of 0.25%.  However, proportionately, the reduction in the deposit rate is greater (-10%) than the reduction in lending rate (-4.67%).  The net effect is an ncrease in the gross profit margin of the banks by 5.33%.  Thus, the banks stand to profit from this change, and the stock market stands to gain new investors from those who have given up earning interest on their bank deposits.  

But, who is the poorer for this?  The Laobaixing, the people who worked and saved all their lives, are the losers.  And these losers are the 99% of the Chinese people who have no foreign connections and no foreign investments, and know nothing about stocks and speculation.  This "remedy" for an erroneous Yuan exchange rate merely puts the burden of correcting its exchange rate mistake on the shoulders of the general working population, to pay with their savings, what their central bank lost with its overvaluation of the Yuan.  This solves the temporary problem of the contraction of the economy, but actually deepens the problem, as it necessitate inflation.  

China is now on the slippery slope of allowing more and more inflation, as it keeps lowering the interest rate in order to stimulate the economy strangled all the while by the death choke of a high Yuan exchange rate, all of which invariably leads to major social upheavals, as the last time this was engineered in February 1989 by the now deposed fellow, with inflation rate upwards of 25% at that time, he managed to gather a massive crowd outside TAM demanding the dismantling of the Chinese government.  This is where China is headed to, and where the struggle for its soul will end up at.  History is repeating itself with a vengeance.







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Rank: 6Rank: 6

Post time 2015-5-13 09:13:56 |Display all floors
It is stupid to stimulate the china economy by reducing interest rate.

China should let market play a part and go into recession for 1 to 2 years to flush out those greedy speculators who make quick bucks by exploiting sudden change of supply and demand in the property market.

If China leaders worry about jobs creation, then there are plenty of jobs can be created in the construction market such as building roads in rural areas, and building Mass Rapid Transit trains system in cities with 2 million population and above.

Why does China leaders want the city population to grow to 3 million then only build the mass transit train system.  They could have build the mass transit now before the cities reach 3 million population.

Stupid China leaders.

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Rank: 8Rank: 8

Post time 2015-5-13 18:02:37 |Display all floors
bushier Post time: 2015-5-13 09:13
It is stupid to stimulate the china economy by reducing interest rate.

China should let market play ...

Mr. Market is hardly the best person to decide what kinds of investments China needs.  China's leaders are smarter than Mr. Market, which is why China has beaten the market for 30 years, and only now, when trying to court the favors of Mr. Market has China been losing money for the last 5 years, especially with its dream to join the elite club of backers of the IMF SDR/XDR, which laughably, account for less than 4% of the total foreign currency reserves of the central banks around the world.  Why China wants to be part of the less than 4% crowd of has-beens, and call it a crowning achievement cannot be explained in economic terms, only in psychological terms.

China is no longer just trying to please the IMF.  That is the cover story.  China's banking system is now UNDER the control of the IMF, and with its merciless overvaluation of the Yuan even at the expense of wrecking its world-class manufacturing sector just to be able to finance 4% of the world's reserve currencies under the aegis of the aging IMF, is being directed to commit mass economic and political suicide.

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Rank: 6Rank: 6

Post time 2015-5-14 19:25:38 |Display all floors
It was IMF who wanted China to join their exclusive club. China is not rich enough to join this exclusive club whose aim is to suck the poor Third world countries dry.

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Rank: 8Rank: 8

Post time 2015-5-15 13:41:00 |Display all floors
Attempting to "fulfill the IMF mandate" is like trying to "fulfill one's pact with the Devil" which always ends in moral and physical damnation without any chance of future redemption.

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