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China breaks out its biggest economic band-aid yet
The People’s Bank of China announced a raft of measures on Tuesday aimed at boosting the flagging economy as the country seems likely to miss its 5% GDP growth target for 2024.
What’s the plan?
- Cut the amount of cash banks need to keep on hand by half a percentage point to inject 1 trillion yuan ($142 billion) into the economy.
- Cut the interest rate on seven-day reverse repurchase loans from 1.7% to 1.5% to goose spending.
- Make it easier for banks to lend to corporations trying to repurchase their own shares.
- Cut interest rates on existing mortgages by half a percentage point.
- Cut required down payments for mortgages on second homes to 15% instead of 25%.
- Allow some banks to pay less interest on deposits to encourage consumer spending
- Signal more support could be coming.
Will it work? It should get China through 2024, but even though it’s the biggest move Beijing has made to stabilize its grumbling economy, it’s not a panacea.
First, it’s unclear that businesses are ready to borrow, even at advantageous interest rates, meaning that liquidity won’t necessarily get used. It also doesn’t address the structural problems of China’s property market, where many developers have defaulted. It includes little incentive for ordinary consumers to go out and spend, and the lack of demand is dragging on China’s growth.
We’re watching how this round of buoying plays out, and whether a bigger stimulus is on the horizon in 2025.
Two types of cicadas that resurface every 13 and 17 years, respectively, are making their rare appearance this spring.
HARD NUMBERS: Cicadas plan historic reunion, China uncorks stimulus binge, Collusion claim rocks shale, Argentina gets more IMF money, Melinda Gates walks out the door
221: Can you hear it? If you’re in the US Midwest you sure can. After 221 years, two local broods of cicadas – red-eyed, beetle-like insects that grow underground for years before emerging for a single summer of cacophonous buzzing and mating – will emerge at the same time. Brood XIII, based in Illinois, comes up every 17 years, while Brood XIX does so every 13 years. For context, the last time they were out at the same time, Illinois wasn’t even a state yet.
140 billion: As its GDP growth picks up again, the Chinese government is looking for some further stimulus, and what better way to invigorate the economic senses than $140 billion in long-dated sovereign bonds? Beijing will start selling the paper this week, putting the funds towards “modernization.” China is looking to wean itself off of an economic model that relies heavily on property investment.
10: At least 10 new class action lawsuits allege that US shale oil producers colluded to keep crude prices up, driving up gasoline prices too. The shale oil industry, which uses advanced technologies to pull petroleum hard-to-develop shale rock formations, has boomed in the past decade, catapulting the US into the global top spot in oil production.
800 million: The IMF is set to disburse another $800 million in support for Argentina after determining that new President Javier Milei’s radical austerity reforms have helped to stabilize the economy. The eccentric Milei, a self-described “anarcho-capitalist,” has slashed spending since he was elected on promises to fix a moribund economy mired in triple-digit inflation. For a deeper look at how and why Milei is succeeding, see this Quick Take by Ian Bremmer.
12.5 billion: Philanthropist Melinda Gates, formerly married to Microsoft founder Bill, is stepping down from the Bill and Melinda Gates Foundation, one of the largest donor organizations in the world. As part of her agreement, she will keep $12.5 billion to direct towards her own work supporting women, minority groups, and families. To date, the foundation has given out more than $75 billion in grants to development and healthcare projects. Melinda and Bill divorced in 2021.