Economy Mar 17

Everbright says China insulated against US-style declines

Rising inflation makes it difficult for PBOC to lower interest rates 

by Xu Yuenai
Everbright says China insulated against US-style declines
PBOC headquarters in Shanghai.

(ATF) – Zhang Xu, chief analyst at Everbright Securities, said the prices of assets such as US treasury notes and stocks fell sharply due to the outbreak of Covid-19, while some markets were facing an extreme lack of liquidity.

Zhang said, fortunately, these problems did not happen in China. He said Chinese bond yields have fallen sharply since the beginning of the year, while the Chinese stock market was more stable than that of the United States.

As a result, it was not urgent for China’s central bank to lower interest rates for the medium-term lending facility (MLF). 

At the current stage, inflationary pressure has remained a constraint for China to loosen its monetary policy, Zhang said. Since the fourth quarter of last year, China’s consumer price index has risen rapidly compared with the same period last year, while one-year MLF interest rates have fallen, he said. Low-interest rates may create financial risks, he said.