China Center Data Flash: Slowing growth and weak loan demand trigger PBoC action

Data Flash is a brief interpretive summary of China’s official monthly economic data release.

Economic growth continued on its downward trend as Q4 started and looks to have deteriorated further in November, prompting an interest rate cut by the central bank on Friday, November 24. The cut is an attempt to lower financing costs for the real economy in response to recently weak credit growth brought on by a combination of subdued demand for financing and rising real interest rates as deflationary forces have increased. We question whether the cut will have its intended effect. 

In addition, the NDRC has reportedly approved 700 billion RMB worth of infrastructure projects in the October-November period, as reflected in yet another run-up in infrastructure spending in October. So far, however, these types of initiatives have still not been enough to stop the downward slide in economic momentum.