Bloomberg article on the People’s Bank of China (PBOC) rate cut as a mechanism to boost household consumption:
- Xinhua says “This asymmetric interest rate cut makes the banks pass on their profits to benefit enterprises and savers”
Article goes on:
- Payments to depositors that often failed to match the inflation rate enabled banks to funnel cheap loans to state enterprises and infrastructure investment
- A sustained easing of this so-called financial repression would channel more wealth to the masses and help boost consumption
- “China has started to undo decades of financial repression,” said David Dollar, a former U.S. Treasury Department official in China who is now a senior fellow at the Brookings Institution in Washington. “Chinese savers can get up to 3.3 percent on a one-year deposit. With inflation of 1.6 percent, that is a high real-interest rate compared to other major economies.”
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Well, that all sounds great…
