China's central bank cut interest rates on Monday for the second time this year, but analysts say it will do little to stimulate lending in an economy awash with cash but lacking in consumer demand and business confidence.
The People's Bank of China (PBOC) cut rates on its one-year and 7-day lending facilities by 10 basis points after data for July showed a more gloomy economic picture than before.
On the other hand, house prices also fell. Property investment also declined and new construction was also reported to be weak. China's retail sales rose 2.7% in July, compared with 3.1% in June, indicating a slowdown in consumer spending.
Industrial production also fell short of expectations. Coupled with concerns over the new outbreak of COVID-19, worries about jobs and the crisis in the real estate sector have affected borrowing by companies and consumers.
Chinese banks extended 679 billion yuan ($101 billion) in new yuan loans in July, less than a quarter of June's total, according to data released by the PBOC last week. Much of China's recent monetary and fiscal stimulus has flowed into savings. Chinese households added 10.3 trillion yuan in deposits in the first half of 2022.
According to Refinitiv Lipper, total net assets of Chinese mutual funds jumped to a record $1.58 trillion at the end of June, 6.7% higher than at the beginning of the year. In the stock market, outstanding margin loans have risen to a four-month high of 1.64 trillion yuan, while equity mutual funds have attracted $7 billion in the past two months.
