President Xi under pressure to take bold steps as China's economy slows after surprise rate cut
People’s Bank of China on Tuesday lowered the rate on its one-year loans — or medium-term lending facility — by 15 basis points to 2.5%, the steepest cut in three years. The move came shortly before the release of July data that showed weak consumer spending growth, sliding investment and rising unemployment.
Zooming out, the economic picture looks even worse. Bank loans plunged to a 14-year low last month, while deflation is setting in and exports are contracting.
One of China’s largest property developers is at risk of default and a financial conglomerate with 1 trillion yuan ($138 billion) under management missed payments on investment products, stoking fears about possible contagion. All of that is adding pressure on Xi to do more in two areas he has sought to avoid: Helping out the heavily indebted property sector and giving consumers more cash to spend — something a central bank adviser in China this week called “the most urgent goal." The failure to revive confidence more broadly risks leading to economic pain that could blow back on Communist Party leaders.
Last year saw a wave of mortgage boycotts and unprecedented protests against Xi himself as residents got fed up with the world’s strictest Covid-19 restrictions. Chinese authorities remain sensitive about the narrative over the economy, instructing analysts to avoid discussing deflation and restricting access to key data.
China on Tuesday suspended publishing data on its soaring youth unemployment rate to iron out complexities in the numbers, fanning fears about transparency. “The declining economy dramatically increases the risk of unrest," said Drew Thompson, a former Pentagon official and businessman in China who is now a senior fellow at the Lee Kuan Yew
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