China leaves key interest rate unchanged
China has surprised economists by deciding not to cut a key interest rate that influences mortgages, as the government comes under pressure to boost growth. The central bank kept its five-year loan prime rate unchanged at 4.2 per cent, while trimming the one-year equivalent to 3.45 per cent from 3.55 per cent – a smaller amount than investors predicted. China is adopting a “drip-feed” approach to counter a decelerating economy facing a property sector crisis and more than one in five young people out of work. This is deliberate, says Bloomberg, as Xi Jinping tries to steer the country away from debt-fuelled growth towards a “new economy” powered by green manufacturing sectors and microchips. The problem is that these sectors are not growing fast enough to offset the property slump. So the question is how far economic growth can slow before public anger demands bolder action.
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