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New Covid-19 outbreak prompts PBOC to hold interest rates

New Covid-19 outbreak prompts PBOC to hold interest rates

The Chinese central bank kept interest rates unchanged, as the resurgence of the coronavirus pandemic once again will probably prompt the PBOC to hold stimulus for a longer period of time.

The Chinese central bank has fixed the one-year major lending interest rates at 3.85% and the 5-year interest rates at 4.65%. This comes a few days after the central government announced that there may be a reduction in the reserve requirement ratio (RRR) to help stimulate the economy.

The PBOC is looking for a targeted reduction in the reserve requirement ratio (RRR) by 0.5%, to be applied to some Chinese banks according to the specific requirements for using liquidity for small and medium companies.

It is worth noting that it is still possible to see a reduction in interest rates by the PBOC, but it may not be in the form of initial loan rates, but through the special re-lending program for small and medium-sized companies.

On the other hand, the Chinese yuan rose against the dollar after the Chinese central bank decided to fix interest rates, but this rise is not expected to continue long as long as the external risks facing the Chinese economy have not changed.

One of the most important of these risks is the technology war with some economies, especially the United States. The other thing is that the cases of coronavirus and social spacing have kept world demand at a very low level, which will continue to harm export orders from China.

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