Bloomberg News

Mizuho’s Shen Says China’s Monetary Policy ‘No Longer Prudent’

July 05, 2012

Shen Jianguang, chief Asia economist for Mizuho Securities Asia Ltd., comments on China’s second interest-rate cut in a month.

The People’s Bank of China said today the one-year lending rate will fall by 31 basis points and the one-year deposit rate will drop by 25 basis points effective tomorrow. Banks can offer loans of as much as 30 percent less than benchmark rates, the central bank said on its website.

“It looks like that the Chinese authorities have realized that stabilizing growth is a challenging job now. If they do not loosen, hard-landing is possible.”

“This is aggressive loosening -- last month the discount was 20 percent, and now 30 percent. It also indicates interest rate liberalization is fast. The monetary policy is no longer prudent.”

“It’s likely that June’s data are not good. CPI may have come down more than expected.”

To contact the reporter on this story: Helen Sun in Shanghai at hsun30@bloomberg.net

To contact the editor responsible for this story: Shiyin Chen at schen37@bloomberg.net


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