Growing Concerns About the Strength of China's Economic Recovery

The People's Bank of China lowered its short-term lending rate today, Tuesday, for the first time in ten months in a bid to restore market confidence and support the faltering recovery from the pandemic in the world's second-largest economy. This could indicate the possibility of urgent stimulus measures to bolster growth. The central bank reduced its seven-day reverse repos rate by ten basis points to 1.90% from 2.00% today and injected 2 billion yuan ($279.97 million) through short-term bond instruments. The yuan hit a six-month low at 7.1680 against the dollar following the interest rate decision. China continues to diverge from global central banks by adopting accommodative monetary policies to support growth, while its major counterparts are raising interest rates to curb rising consumer prices. Traders and analysts stated that the interest rate cut today signals that policymakers are increasingly concerned about the strength of China's recovery.