China’s central bank added more funds into the banking system but kept its borrowing cost unchanged after the US Federal Reserve unexpectedly reduced the interest rate by 100 basis points.
Official data showed that industrial production and retail sales plunged more-than-expected at the start of the year following factory shutdown and households curb spending after the spread of coronavirus.
The People’s Bank of China offered CNY 100 billion or $14.3 billion into the financial system via one-year medium-term lending facility on Monday. But the bank kept the rate at 3.15 percent.
The central bank last week had reduced the reserve requirement ratio by 50-100 basis points for qualifying banks to shore up the economy hit by the outbreak of covid-19. This was the second cut in RRR this year.
Industrial production plunged 13.5 percent in January to February period after rising 6.9 percent in December, the National Bureau of Statistics reported Monday. Economists had forecast a moderate 3 percent decrease.
Retail sales logged a sharp fall of 20.5 percent reversing an 8 percent increase in December Sales were forecast to drop only 4 percent.
Fixed asset investment was down 24.5 percent versus a 5.4 percent rise in January to December 2019. FAI was expected to fall 2 percent.
Further, the jobless rate surged to 6.2 percent, data showed.
Another report from NBS showed that home sales decreased 34.7 percent annually in the first two months of 2020. Property investment fell 16.3 percent after rising 9.9 percent in January to December 2019.
The statistical office said the impact of the epidemic is short-term and controllable and the spread of the virus has been curbed.
There is nothing in the history of this data that can compare to this set of abysmal figures, Iris Pang, an ING economist said. The economist said China is now at the recovery stage from the coronavirus but the global spread of the virus means that China’s economy is not going to recover fully soon.
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