Chinese growth is descending below the appointed glide slope and on Saturday the PBOC acted again which was absolutely no surprise given the recent crash in money supply growth. From Investing in Chinese Stocks:
The PBOC cut interest rates by 25 basis points, lowering the one-year loan rate from 5.60% to 5.35%. The deposit rate falls from 2.75% to 2.5%. However, the PBOC increased the deposit band to 130% of the official rate, up from 120%. Banks could pay 3.30% interest on deposits before the cut, today it is 3.25%. This ends up being a rate cut across the board, unlike in November, whendeposit rates were allowed to go up.
Liu Shan, deputy editor of the China Business Times, discusses the reasons for rate cut. He notes that deflationary forces in the economy and a monetary phenomena and lists the causes, which include
