The People's Bank of China decided to cut financial institutions RMB benchmark deposit and lending interest rates since July 6, 2012. The one-year benchmark deposit rate cut by 0.25 percentage points year benchmark lending interest rate cut by 0.31 percentage points. Since the same day, the lower limit of the floating range of lending rates of financial institutions was adjusted to 0.7 times the benchmark interest rate. The interest rate cut the previous time interval less than a month, fully reflects the growth of intent at the national stability.
Similarly, in China's central bank cut interest rates at the same time, the ECB announced that the deposit rate from 0.25% down to 0%, the refi rate down from 1.0% to 0.75%. Although the Bank of England left interest rates unchanged, but will increase in the amount of the bond purchases by 50 billion pounds to 375 billion pounds. The industry believes that the central bank cut interest rates to belong to the collective action of the global central bank.
Less than a month's time, the central bank cut interest rates, on the one hand, because the inflation level down to provide space for the fall in interest rates. In May, China's consumer price level rose 3.0 percent, the lowest since June 2010. Experts predict that the CPI downward trend ahead of market expectations, and in July is expected to fall to below 2%. On the other hand is a clear trend of the economic downturn. January to May, investment in fixed assets (excluding farmers) 10.8924 trillion yuan, year-on-year nominal growth of 20.1 percent, approaching the 20% barrier has fallen to its lowest level since 2003.
Even before and after the financial crisis in 2008, this growth did not come close to 20%. From the growth rate of industrial added value, in May, above-scale industrial output growth was only 9.6%, less than 10% for two consecutive months, the estimated second-quarter GDP growth rate fell below 8 percent more likely than big. In this case, interest rate reflects the steady growth of a strong intention of the State.
The industry believes that this rate cut is relatively rare in the history of non-symmetrical cut interest rates (deposit and lending rates do not decline in sync), which largely reflects the determination and strength of the economic growth of the national security. Cut interest rates, the total one-year lending rate down more than 50 basis points, to stimulate demand for loans and reduce financing costs, and improve corporate profits, which will boost market confidence, to a certain extent.
Since the second half of 2011, the steel industry downturn, corporate profits have been shrinking dramatically involving steel. Steel Association released data show that from January to May, large and medium-sized steel enterprises realized profits of only 2.533 billion yuan, down 94.26 percent, including loss of enterprises reached 11.749 billion yuan, the loss of 32.5%. Cut interest rates, help to reduce the operating costs of the iron and steel enterprises, and to some extent, ease the cost pressures in the steel industry.
However, industry sources also pointed out that time because the conduction of the positive effects of monetary policy loose to manufacturing and other economic entities, to ease its shortage of funds, but also requires a process, conduction to the steel market longer; downstream end-user demand for steel the release will not be immediate; and crude steel production remained high, and production pressures still exist; the same time, for the industry off-season in July and August, the sustained high temperatures the market demand more depressed. Therefore, the consecutive interest rate cuts may help boost the confidence of the Steel City, but it is difficult to change the trend of the overall situation of the steel market, steel market prices will remain weak shocks expected in July.
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