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China Joins Global Easing Party By Cutting The Lending And Deposit Rates By 25 bps

Tyler Durden's picture


Update: 9:00 am has come and gone... and no global bailout unlike November 30, 2011. Not a good sign for those expect a central-bank D-Day.

While minutes ago the Bank of England followed in the ECB's footsteps, it was the China central bank that stole England's thunder, announcing an unexpected rate cut moments before 7 am, and thus finally joining the global easing party: this was the first Chinese interest rate cut since 2008. As a reminder, hours before the global central bank intervention on November 30, China announced its first (50 bps) reserve requirement cut since 2008. Is today's PBOC move, which is the first cut of deposit and 1 year lending rates also since 2008, a harbinger of something much bigger to come any second now?

From the PBOC:

The People's Bank of China decided to cut financial institutions RMB benchmark deposit and lending interest rates since June 8, 2012. One-year benchmark deposit rate cut of 0.25 percentage points, year benchmark lending interest rate cut by 0.25 percentage points; other deposit and lending interest rates and individual housing provident fund deposit and lending rates be adjusted accordingly.


Since the same day: (1) the upper limit of the floating range of interest rates on deposits of financial institutions was adjusted to 1.1 times the benchmark interest rate; (2) loans from financial institutions interest rate floating range of the lower limit was adjusted to 0.8 times the benchmark interest rate.

And from Bloomberg:

China Cuts Interest Rates for First Time Since 2008

China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth.

The benchmark one-year lending rate will drop to 6.31 percent from 6.56 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year deposit rate will fall to 3.25 percent from 3.5 percent. Banks can also offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent.

European stocks and U.S. index futures extended gains as China’s move fanned optimism that policy makers around the world will do more to bolster growth. The announcement, two days before China is due to report inflation, investment and output figures, may signal that the economy is weaker than the government expected.

“This will be the beginning of a rate cut cycle and there will be at least one more reduction this year,” said Shen Jianguang, a Hong Kong-based economist with Mizuho Securities Asia Ltd. “The data to be released over the weekend must be very weak and inflation must have eased sharply.”

The MSCI All-Country World Index added 0.8 percent at 7:30 a.m. in New York. The Stoxx Europe 600 Index jumped 1.2 percent, extending yesterday’s biggest rally in six months, while the Standard & Poor’s 500 Index futures advanced 0.7 percent.

Slower Growth

The central bank last reduced benchmark interest rates in late 2008, when the government unveiled a 4 trillion yuan ($586 billion at the time) stimulus package to counter the effects of the global financial crisis. Interest rates have been unchanged since an increase in July 2011.

Industrial output in China, the world’s biggest producer of steel and cement, probably rose 9.8 percent last month from a year earlier, close to the slowest pace in three years, according to the median estimate in a Bloomberg News survey of 27 economists ahead of a National Bureau of Statistics report due June 9.

Inflation may have moderated to 3.2 percent in May from a year earlier after a 3.4 percent rate in April, a separate survey showed, the fourth month consumer prices have risen by less than the government’s 2012 target of 4 percent.

Today’s move signals policy makers are concerned that the cost of borrowing is crimping companies’ spending and holding back expansion in the world’s second-biggest economy. Three bank officials told Bloomberg News last month that the nation’s biggest banks may fall short of loan targets for the first time in at least seven years as demand for credit wanes.
Slowdown Worsening

The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.

China’s manufacturing expanded at the slowest pace in six months in May, a government report showed on June 1, adding to signs the nation’s slowdown is worsening. A separate purchasing managers’ index from HSBC Holdings Plc and Markit Economics pointed to a seventh straight contraction, the longest stretch since the global financial crisis.

Premier Wen Jiabao and the State Council, or Cabinet, pledged last month to place greater emphasis on stabilizing growth after data showed April industrial production, new loans and exports all increased less than economists forecast. The data prompted banks including Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. to cut their economic-growth estimates.

Slowdown Worsening

The PBOC cut banks’ reserve requirements in November for the first time in three years, and again in February and May, to spur lending.

China’s manufacturing expanded at the slowest pace in six months in May, a government report showed on June 1, adding to signs the nation’s slowdown is worsening. A separate purchasing managers’ index from HSBC Holdings Plc and Markit Economics pointed to a seventh straight contraction, the longest stretch since the global financial crisis.

Premier Wen Jiabao and the State Council, or Cabinet, pledged last month to place greater emphasis on stabilizing growth after data showed April industrial production, new loans and exports all increased less than economists forecast. The data prompted banks including Goldman Sachs Group Inc., Morgan Stanley and Bank of America Corp. to cut their economic-growth estimates.


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Thu, 06/07/2012 - 07:12 | 2502707 Colombian Gringo
Colombian Gringo's picture

QE to infinity, bitchez.

Thu, 06/07/2012 - 07:36 | 2502811 Popo
Popo's picture

Now watch how fast the price of oil kills the latest QE party.

Same story every time...

Thu, 06/07/2012 - 08:06 | 2502897 GetZeeGold
GetZeeGold's picture



The boys from Brazil are sending in Barry's campaign contribution check as we speak.....cause it's just freakin crazy to pump that stuff out of the back yard.


Thu, 06/07/2012 - 08:11 | 2502917 GMadScientist
GMadScientist's picture

And stay tuned for whether or not the price of pork kills the communist party.


Thu, 06/07/2012 - 07:37 | 2502815 economics9698
economics9698's picture

Playing the Yids game, never thought the Chinese would be this stupid.

Thu, 06/07/2012 - 07:59 | 2502860 tocointhephrase
tocointhephrase's picture




Thu, 06/07/2012 - 08:11 | 2502924 GMadScientist
GMadScientist's picture

The first couple hundred billion in reserves were a clue.

Thu, 06/07/2012 - 07:58 | 2502874 maxmad
maxmad's picture

So they are easing to buy more gold and silver!  Makes sense!  Whereas Bernanke is easing to buy more worthless paper! Like Bonds.... Game over!  China wins, they GET IT!

Thu, 06/07/2012 - 08:41 | 2503025 economics9698
economics9698's picture

The Fed has 8,400 ounces of gold.

Thu, 06/07/2012 - 08:46 | 2503045 Floordawg
Floordawg's picture

That's TONS, not ounces... approximately 8400 UNSUBSTANTIATED TONS.

Thu, 06/07/2012 - 08:55 | 2503078 economics9698
economics9698's picture

Yep.  opps.

Thu, 06/07/2012 - 08:47 | 2503054 BlueCollaredOne
BlueCollaredOne's picture

I'll believe it when I see it. 

Thu, 06/07/2012 - 08:55 | 2503076 jekyll island
jekyll island's picture

The people who get to use the newly printed money first are the ones who benefit the most.  It's the sheeple that get screwed.  Of course China knows this, they are a big currency manipulator, right Timmay?  

Thu, 06/07/2012 - 07:13 | 2502714 billwilson
billwilson's picture

More reason for Chinese savers to buy GOLD.Nothing else gives a return ... cause you sure don't want to buy one of the empty condos growing across the land, or put your money in a Chinese bank (stuffed full of NPLs)

Thu, 06/07/2012 - 07:13 | 2502715 fonzannoon
fonzannoon's picture

Can someone please explain this to me as I claim total ignorance here. China cuts interest rates. I watch gold in USD go from 1613 (approx) to 1625. Why would gold rise in USD? Would gold not rise in Remninbi and fall in USD as the USD strengthens?

Thu, 06/07/2012 - 07:20 | 2502736 Boilermaker
Boilermaker's picture

You're trying to cling to the premise that any of it is legit.  Accept that it's all bogus and you'll be better in the head.

Thu, 06/07/2012 - 07:22 | 2502748 GeneMarchbanks
GeneMarchbanks's picture

+1 as usual.

Meanwhile what's the half-life of this recycled policy? Weeks or days?

Thu, 06/07/2012 - 07:27 | 2502767 LongSoupLine
LongSoupLine's picture

Lol...I mean, cry.

Thu, 06/07/2012 - 07:43 | 2502836 ThirdWorldDude
ThirdWorldDude's picture


Coordinated global effort to prevent the cardboard ponzi box from crumbling.

"... All the restaurants are Taco Bell now."  - Demolition Man

Thu, 06/07/2012 - 07:22 | 2502747 Comay Mierda
Comay Mierda's picture

are you trying to make a correlation between the "market" and common sense?

Thu, 06/07/2012 - 07:26 | 2502758 Chaffinch
Chaffinch's picture

Fonz - I get your point, but on a gut level it kind of makes sense - interest rates (globally) falling - global rush towards gold - price of gold goes up...
But if TPTB had chosen that moment for a raid, then some pseudo analyst would have made the well-structured argument you put forward to explain why things had gone the other way!

Thu, 06/07/2012 - 07:26 | 2502761 FullFaithAndCretin
FullFaithAndCretin's picture

China cuts interest rates > more disposable Chinese capital to buy gold > Everyone rushes to buy gold before the Chinese get it all and send the price up > price goes up anyway

Thu, 06/07/2012 - 07:29 | 2502776 fonzannoon
fonzannoon's picture

Thanks for the responses. I guess I am insane to try to connect the dots. I will now wait to see if when Ben farts at 10am if it is loud or smelly to see where gold goes from here.

Thu, 06/07/2012 - 07:33 | 2502797 JackT
JackT's picture

Make sure you bring your binoculars!

Thu, 06/07/2012 - 08:04 | 2502891 Soul Train
Soul Train's picture

They say it's always loud AND smelly.

That's why they're all smiling. They love the smell of corruption.
Thu, 06/07/2012 - 08:27 | 2502989 CloseToTheEdge
CloseToTheEdge's picture


“Engage people with what they expect; it is what they are able to discern and confirms their projections. It settles them into predictable patterns of response, occupying their minds while you wait for the extraordinary moment — that which they cannot anticipate.”

sun tzu



(to the herded)

Thu, 06/07/2012 - 07:48 | 2502848 DormRoom
DormRoom's picture

It means Central Bankers may be trying to keep the shadow economy going, while ignoring  how the shadow economy is underming the  REAL economy.



Thu, 06/07/2012 - 09:02 | 2503101 mendigo
mendigo's picture

From the least qualified person here (making it easy to offer an opinion):

The market is not always rational - there are too many variables at play at any moment and changing simultaneously and there is a lag in response to each or the response has been anticipated. There is no making sense of it in the short-term really - there are only shifting probabilities. Which is why I believe "traders" resort to "technical" analysis and consensus - essentially abandoning all reason in the short term. Only in moments of extreme stress to the system is reality revealed however briefly. Perfect ponzi game.

This is why the market craves constant stimulus, good or bad doesnt matter - without volatility it would die of entropy death. 


Thu, 06/07/2012 - 07:15 | 2502722 bigwavedave
bigwavedave's picture

So where is my pension fund gonna get its 8% YOY returns now eh? Oh... wait

Thu, 06/07/2012 - 07:36 | 2502812 BandGap
BandGap's picture

You need to think about working from home with one of those hotties.

Thu, 06/07/2012 - 07:41 | 2502832 GubbermintWorker
GubbermintWorker's picture

From gold, guns, ammo, silver, water, and non-perishable food stuffs?


Oh, alcohol and pot might give good returns in the future also :-)

Thu, 06/07/2012 - 07:16 | 2502726 LawsofPhysics
LawsofPhysics's picture

Why would China need to cut rates? I mean they say that they are doing so well. Can't be that they are lying now could it? Definitely need to ask for gold when they order more soybeans. Awesome.

Thu, 06/07/2012 - 07:19 | 2502731 Boilermaker
Boilermaker's picture

Can't be.  If there is one thing in this world that is absolute, the Chinese have impeccable integrity and honesty.  You can take THAT to the Chinese bank of your choice.

Thu, 06/07/2012 - 07:17 | 2502729 Boilermaker
Boilermaker's picture

and the ES...EXPLODES higher.

This is so f'ing ridiculous.

At least I'll have something to tell my grand-children from my debt prison cell.

Thu, 06/07/2012 - 07:25 | 2502763 caimen garou
caimen garou's picture

china in on the world ponzi scheme, they are learning the how to play the game with advisors from jpm and gs.

Thu, 06/07/2012 - 07:30 | 2502782 LongSoupLine
LongSoupLine's picture

Their advisor is better than GS and JPM.

Sun Tzu...bitchez.

Thu, 06/07/2012 - 08:11 | 2502921 CloseToTheEdge
CloseToTheEdge's picture



“To know your Enemy, you must become your Enemy.”

sun tzu

Thu, 06/07/2012 - 08:25 | 2502979 WmMcK
WmMcK's picture

Walt Kelly said something similar.

Thu, 06/07/2012 - 08:56 | 2503084 jekyll island
jekyll island's picture

So did PT Barnum

Thu, 06/07/2012 - 09:24 | 2503178 LULZBank
LULZBank's picture

china in on the world ponzi scheme, they are learning the how to play the game with advisors from jpm and gs.

Dont need much of advisors, its simple: Earn easy dollars and convert to hard and productive assets while waiting for the inevitable. Same as preppers but on a national scale.

Thu, 06/07/2012 - 09:59 | 2503371 post turtle saver
post turtle saver's picture

Hey that sounds familiar... issue a bunch of worthless paper and IOUs to buy up petroleum / guns / bullets / nukes / forward bases / other stuff that gives us power to take all the gold you're buying.


And people say the MIC doesn't know what they're doing.

Thu, 06/07/2012 - 07:26 | 2502765 Boilermaker
Boilermaker's picture

God save the equities valuations!

God save the equities valuations!

Thu, 06/07/2012 - 07:28 | 2502769 SmoothCoolSmoke
SmoothCoolSmoke's picture

Chuck the Finese.

Thu, 06/07/2012 - 07:28 | 2502770 VonManstein
VonManstein's picture

or maybe it means the FED can hold off like the BOE?

Thu, 06/07/2012 - 08:55 | 2503048 BlandJoe24
BlandJoe24's picture

BOJ (a few days ago): no easing/qe

ECB (two days ago): no easing/qe

BOE (today): no easing/qe


Tyler over-dramatizing:  There is no current  Global Easing/QE Party

There may be one later....or not....?

Thu, 06/07/2012 - 07:31 | 2502790 The Swedish Chef
The Swedish Chef's picture

Gold seems to say yes... 

Thu, 06/07/2012 - 07:32 | 2502791 Dr. Engali
Dr. Engali's picture

So how much will Ben buy? 1 trillion? 2 trillion? It's going to have to be big in order to not disappoint the heroin junkies.

Thu, 06/07/2012 - 07:34 | 2502802 indianajohns04
indianajohns04's picture

looks like FAZ loses again!

Thu, 06/07/2012 - 07:34 | 2502804 slaughterer
slaughterer's picture

Once the Bernanke is done fluffing Congress with his dovish earnestness, I am laying into the shorts heavy.  

Thu, 06/07/2012 - 07:38 | 2502818 BandGap
BandGap's picture

There you go, using logic again.

Thu, 06/07/2012 - 07:34 | 2502805 digitlman
digitlman's picture

Fuck these fuckers.  I have long since taken my ball and gone home.

Thu, 06/07/2012 - 07:38 | 2502821 Stock Tips Inve...
Stock Tips Investment's picture

This low rate of interest is not simply the Chinese government reaction to the slowdown of its economy. In a centrally planned economy, this is a red light of danger.

Thu, 06/07/2012 - 08:59 | 2503088 jekyll island
jekyll island's picture

China needs to maintain an 8% growth rate to keep their people busy and prevent them from thinking about overthrowing the government.  They are going to end up being the biggest bubble.  Ever.  Why do you think they are buying all that gold?  

Thu, 06/07/2012 - 10:02 | 2503392 post turtle saver
post turtle saver's picture

We're doing to China now what we did to Japan in the '90s. The funny part is we telegraph these punches from a mile away and the chin is still firmly in the trajectory when the punch arrives. China is mesmerized... and screwed.

Thu, 06/07/2012 - 07:39 | 2502822 lolmao500
lolmao500's picture

US patience with Pakistan ‘reaching limits’ – Panetta

Defense Secretary Leon Panetta said on Thursday US officials are “reaching the limits” of their patience with Pakistan and urged the country to do more to root out the Al Qaeda-linked Haqqani terrorist network.

Mein Fuhrer! I WALK!

Thu, 06/07/2012 - 08:20 | 2502963 BudFox2012
BudFox2012's picture

I think we better start worrying about the World's patience with the US.  At some point in the near future, when we have reverted to a 3rd world country (in reality and on paper), payback is going to be a bitch.

Thu, 06/07/2012 - 10:15 | 2503462 post turtle saver
post turtle saver's picture

Oh yeah... "you and what army". I'd love to see the result of any country stupid enough to try and stop us. Americans themselves continually underestimate just how powerful the USA is. Like China is going to do anything to us... call me when they have a navy that can take on six carrier groups. Panetta has their balls in a vise and they know it.


Hell, one example alone... I think Nucor recycles more steel than most countries produce straight up. And the quality is awesome. I wouldn't use Chinese steel to make paper clips let alone anything military grade. Good lord, we have missile cruisers that can take out satellites for cryin' out loud. Operation Burnt Frost, anyone? Remember that? The Chinese came out crowing about some new faux military tech they dreamed up to look tough and in response we popped a satellite out of the sky with an Arleigh Burk cruiser just to show those clowns who was boss.


George Carlin's routine hit the nail on the head... anyone that trys to horn in on the US' "running the world" action is gonna get popped. That's our fuckin' job!

Thu, 06/07/2012 - 20:02 | 2505751 BudFox2012
BudFox2012's picture

While you're puffing your chest out playing internet tough guy proclaiming military superiority, our country is rotting from within.  Why would anyone attack us when all they have to do is show a little patience and wait for our ponzi scheme economy to collapse all on its own?  Trillion dollar weapons systems are worth little if you can't buy your spare parts from China anymore or put deisel in your tanks because no one wants our dollars.  I'm sure there were plenty of Romans that thought they were invincible, right up until the barbarians showed up at their gates...

Thu, 06/07/2012 - 09:21 | 2503169 LULZBank
LULZBank's picture

Hahaha... So much for the "superpower."

What Panetta is really saying is Pakistan should stop retaliating to its drone strikes. Covert tit for tat and it will be getting messy at some point.

The war against the banksters and their prodigies would be fought in AfPak.

Thu, 06/07/2012 - 10:19 | 2503499 post turtle saver
post turtle saver's picture

Pakistan hasn't seen a hundredth of what we're truly capable of. We'd glass their country over and paint lines so India would have free parking if it ever came to that.


Hell, we even held back in WW2. Patton was right, we could have assimilated Germany and shoved the Soviets east into the Pacific if we truly wanted to. Everyone plays the whiny bitch game because they know we're the huge hulking big brother that always holds back. Fight USA, lose, USA rebuilds country better than it was before, Profit.

Thu, 06/07/2012 - 11:20 | 2503874 LULZBank
LULZBank's picture

Pakistan hasn't seen a hundredth of what we're truly capable of.

Capable of what? "Nuking back to stone age" or perhaps shooting the women and children, while the men are away like with Native Americans (Red Indians)?

Soviets were much more brutal than Americans can ever be and were not held back by negative PR. How did their misadventures end? What happened to them?

P.S. First rule of war: Never underestimate your enemy or over estimate your own capabilities.

Thu, 06/07/2012 - 08:18 | 2502957 WmMcK
WmMcK's picture

Adjusted Consolidated Assumed Income - LOL.

Long PNZI on the momo trade.

Thu, 06/07/2012 - 07:44 | 2502840 midgetrannyporn
midgetrannyporn's picture

Confucius say: Man who go to discount barber get cut rate.

Thu, 06/07/2012 - 07:50 | 2502856 BudFox2012
BudFox2012's picture

Great News.  Yesterday we had a rumor of a rumor that the fed was thinking of launching a rumor about QE3, now China jumps on the bandwagon with a rate cut form of easing.  The bad times are over and all our problems are solved.  We're saved!  I'm going to go out and buy a new car, TV, a wheel barrow full of Greek bonds, 10,000 shares of facebook, and 3 houses, all on credit.  (Isn't this the reaction we're all supposed to have at this wonderful news?)

Thu, 06/07/2012 - 08:08 | 2502896 GoldenGal
GoldenGal's picture

You forgot to get some US treasury bonds''....Gold is in  a bubble and you'll need the "safe" haven of the bonds to hedge against your facebook stock.

Oh btw,I have some Chinese condos on sale if you're interested


Thu, 06/07/2012 - 08:13 | 2502937 BudFox2012
BudFox2012's picture

Thanks for reminding me on treasuries.  Wouldn't want to miss out on those awesome yields.

As far as the Chinese condos, I'll buy them only if they are in one of those empty Chinese cities I keep hearing about.  I really hate neighors, and value my privacy, so what better way to protect this than living in a city by myself?

Thu, 06/07/2012 - 08:08 | 2502905 crawl
crawl's picture

You now know the moves of the game. Markets can't tolerate a dip, central banks will rescue. Failed economic policies, central banks will rescue. Sputtering GDP, central banks will rescue.

Countries having debt problems, central banks will rescue.

Capitalism pre 2008 is gone.

Thu, 06/07/2012 - 08:22 | 2502974 Tsar Pointless
Tsar Pointless's picture

This decision wasn't reached overnight last night.

This decision was reached over the past weekend. We're just now "officially" being notified, after the Big Boys made their money in this latest turnaround in the markets. Which began, by the way, overnight Sunday/Monday.

It's a game, and it's all rigged.

Thu, 06/07/2012 - 08:27 | 2502988 Vince Clortho
Vince Clortho's picture

Well spoken.

Decide on a game plan.

Notify all club members what the timing of the plan is.

Setup the media coverage.

Launch the plan and watch the muppets trying to figure out what's going on.

Thu, 06/07/2012 - 08:48 | 2503056 Legolas
Legolas's picture

Now I know why the markets were way up yesterday.  Are all the trading details public record?  There should be a program that analyzes who is doing what on a realtime basis.

Thu, 06/07/2012 - 08:23 | 2502975 Vince Clortho
Vince Clortho's picture

Inflation it shall be.

Thu, 06/07/2012 - 08:39 | 2503014 Snakeeyes
Snakeeyes's picture

Welcome to the party pal!

Swiedem and France sov yields spike up.

Our initial jobless claims dropped but continuing claims rose.


Thu, 06/07/2012 - 08:54 | 2503073 chinaboy
chinaboy's picture

A bad case of global central bank activism.

While they talk about addressing domestic economic slow down, we know that this is another attempt of government proping up the stock market. Eventually, the short term optimism instilled in the stock market will wear off. However, the next Chinese government will have more mess to clean up. Thanks a lot,  Chairsatan of China.

Thu, 06/07/2012 - 09:01 | 2503100 Shizzmoney
Shizzmoney's picture

"Fuck you, Bernanke" - China CB

Thu, 06/07/2012 - 09:13 | 2503142 roadhazard
roadhazard's picture

Annnd speculators spiked the price of oil on the whiff that someone might drive to the store.

Thu, 06/07/2012 - 09:21 | 2503170 junkyardjack
junkyardjack's picture

Who was expecting a bailout? Not the markets

Thu, 06/07/2012 - 09:28 | 2503197 walküre
walküre's picture

Nobody questions that the CB of China was officially off work and probably at the bar when this spectacular rate decision was announced? I know, I know. Just stating the obvious. They are so corrupt and manipulating. Shit must be really bad for them.

BDI is collapsing in June?

Sat, 06/09/2012 - 15:06 | 2510689 Prostar
Prostar's picture

A rate cut cheapens the Rimimbi which is in essence the equivelant of flooding the markets with more fiat currency providing a boost to the price of Gold in Dollar terms but given JPMorgans huge short positions in the COMEX and London exchanges as the Gold price rises in Dollar terms JPMorgan has to unwind its positions.  This will provide a huge blow to JPMorgan.  This a move to break the hold that JPMorgan and other big TBTF banks have on the western gold exchanges.  This is move by China to break the gold cartels' strangle hold.  They want to break the Gold price supression team.  China knows that a price increase in Gold shares will create an increase in demand for the physical gold which is not in the vaults.  Can anyone say DEFAULT?????

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