Low economic growth, global interest rate cuts, China will face an impact

Yesterday, Australia decided to cut interest rates by 25 basis points to 2.75%, a record low. This is the third major central bank in the world to make a rate cut decision in the past week. Earlier, the European Central Bank and the Bank of India have announced a reduction in interest rates.

In addition, the United States and Japan are still continuing large-scale quantitative easing policies, and the liquidity in Europe and the United States is further easing. In contrast, China's macro economy is in a weak recovery. At the same time, under the background of expanding domestic and foreign spreads, the hot money situation is obvious.

Will increased external liquidity force China to cut interest rates? The decision-making environment is far from simple. Some economists and institutions expressed different views when interviewed by the First Financial Daily.

They analyzed that, on the one hand, foreign central banks cut interest rates, expanding domestic and foreign interest rates, and easily lead to more hot money for arbitrage; on the other hand, real estate regulation, and even the need for economic restructuring, are constraining interest rate cuts. In addition, China lacks channels for capital outflows. Combined with the current domestic and international macro background, monetary policy seems to be caught in a dilemma.

"The external shocks facing the Chinese economy are intensifying. The endogenous power of the domestic economy is still weak." Liu Yuanchun, deputy dean of the School of Economics of Renmin University of China, told this reporter that at this point, monetary policy adjustment should be considered. And repositioning.

External loose honeymoon

Yesterday, the Australian Federal Reserve Monetary Policy Conference decided to cut interest rates to 2.75%. Earlier on May 2, the European Central Bank decided to cut the euro zone's dominant interest rate by 25 basis points to a historical low of 0.5%. A day later, the Bank of India announced the third rate cut this year, which cut the benchmark interest rate by 25 basis points to 7.25%.

The European Central Bank also said it will continue to provide unrestricted liquidity to euro zone banks where necessary, at least until July next year. In the context of the euro zone's economy has shrunk for six consecutive quarters and the euro zone unemployment rate reached a record high of 12.1% in March, the ECB has not ruled out the possibility of introducing negative interest rates.

Europe and the United States plus easing, coupled with the US employment and other good (in April, "non-agricultural employment" increased the number of 165,000, the unemployment rate fell to 7.5% in the lowest level in four years), like a suspended honey, attracted the market High jump "taste".

On Tuesday, European stock indexes such as the German DAX and the UK's FTSE 100 continued to open higher. On the same day, the Nikkei index rose 3.6% to 14180.24 points, a five-year high. Since Abe’s new Japanese prime minister last Christmas, the Nikkei has risen 40%. At the same time, the yen is still enjoying the “depreciation honeymoon”. Jim O'Neill, former chairman of Goldman Sachs (GS.NYSE) Asset Management, expects the yen to fall below 100 against the dollar (above 99.10 at the time of publication).

Should emerging market countries integrate into this round of easing? India has given a definite answer.

In explaining the reasons for the rate cut, the Bank of India said that it was mainly based on two considerations: first, economic growth continued to slow down; second, the reduction in inflationary pressure gave him room to implement policies. In fact, the two reasons for the Bank of India are more or less similar for China.

Huang Hai, an analyst at Bohai Securities, said in his analysis that the continued large-scale quantitative easing in developed economies has seriously affected the process of China's economic recovery.