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China Addresses Economic Slowdown, Cut Interest Rates but with Future Warnings

Japan and South Korea Escalating Trade War

The economy in China is slowing down and it is clear that the government is making attempts to place a floor under this slowdown. As we type and read, the Hong Kong protesters are challenging police from key universities while the US-China trade talks seem to have become a political show or theater. But even without these issues, the economic slowdown in China is actually normal and natural. Just a couple of years ago this dynamic economy was expanding at 10% a year but now it has fallen to the a 6.0 to 6.5% range as a mature economy naturally slows down. Some economists feel that this economy is slowing faster and growth is sub-6 percent.

So for now, the Peoples Bank in China has asked commercial lenders to increase credit support to the economy. According to leaders the financial sector “should put development as its first priority,” after a meeting on Tuesday. In the PBOC statement, the economic downward pressure is increasing and the pressure for social credit to contract remains in some areas. The central bank has warned of difficulties down the road and has cut rates in small amounts to guide borrowing costs lower as they manage the levers for the overall economy.

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