China cuts rates after data indicate economic slowdown
- China’s key economic data (Zh/En) in July indicate a slowing economic growth that is “alarming” to economists.
- The total value added of the industrial enterprises above the designated size increased by 3.8% from last year, down by 0.1% from June.
- The annual expansion of retail sales dropped 0.4% from June to 2.7%.
- The investment in fixed assets (excluding rural households) from January to July grew 5.7% from the same period last year, 0.4% lower than the first six months.
- The urban survey unemployment rate was down by 0.1% from June to 5.4%. The rate for youth aged between 16 and 24 increased by 0.6% to a record high of 19.9%.
- The investment in real estate development (Zh) in the first seven months shrank 6.4% from a year ago, with sales of commercial housing down 28.8%, enhancing a downward trend in the sector.
- As a response, the People’s Bank of China (PBoC) lowered two benchmark rates for the first time since January by ten basis points. The central bank cut the rate on 400 billion yuan of one-year medium-term lending facility (MLF) loans to 2.75% and decreased the seven-day reverse repo rate to 2%.
- Before the data was released, the PBoC and the China Banking and Insurance Regulatory Commission (CBIRC) issued a joint statement (Zh) on Friday. According to the statement, insurers will be allowed to sell perpetual bonds from September 9. “This is an important move to further broaden capital replenishment channels for insurance companies and improve their core solvency adequacy,” the regulators said (Zh). The method has been widely used by banks in China after the PBoC (Zh) gave the green light to it in 2018.
U.S. imposes controls on chip software
- On Friday, The Bureau of Industry and Security (BIS) of the U.S. Department of Commerce announced new export controls on four advanced technologies related to semiconductor and gas turbine engines. Although not mentioning specific countries, the measure that includes restrictions on the chip software could limit China’s ability to make breakthroughs in semiconductor technology in the long term.
- The above technologies are covered by the 1996 Wassenaar Arrangement, which aims to control the exports of conventional weapons and dual-use goods and technologies. China is not a member of the Arrangement joined by 42 members, including the U.S., the Netherlands, Japan, South Korea, Russia, and India. The information transparency mechanism of the Arrangement makes it difficult for China to get certain technologies from the member countries.
China holds patrols as Congressional delegation visits Taiwan
- China held (Zh) combat alert patrols and military exercises around Taiwan yesterday in response to the visit by Sen. Ed Markey (D-MA) and another four U.S. lawmakers — Rep. Aumua Amata Coleman Radewagen (R, delegate from American Samoa), Rep. John Garamendi (D-CA), Rep. Alan Lowenthal (D-CA), and Rep. Don Beyer (D-VA).
- Beijing also sanctioned (Zh) seven Taiwanese independence “diehards” (顽固分子) — Hsiao Bi-khim, Wellington Koo, Tsai Chi-chang, Ker Chien-ming, Lin Fei-fan, Chen Jiau-hua, and Wang Ting-yu. The punishment also applies to Su Tseng-chang, Joseph Wu, and You Si-kun, who were already on Beijing’s sanction list.
Ruto announced winner of Kenyan presidential election
- Kenya’s Vice President William Ruto defeated the 77-year-old opposition leader Raila Odinga in the presidential election by a narrow margin of less than 2%. The country’s electoral commission announced the result days after the election. However, four of the seven commission members refused to verify the outcome, possibly leading to a legal challenge to Ruto’s victory within a week.
- Ruto, who won 50.5% of the vote, was born poor and supported by underemployed young “hustlers.” Rising prices, persistent corruption, and devastating drought top the voters’ concerns in the largest economy in Eastern Africa. The current government led by President Uhuru Kenyatta has been accused of corruption and overborrowing from countries like China. During the campaign, Ruto pledged to release government contracts with China and expel illegal workers who are Chinese nationals.