It’s hard to know whether, and to what extent, everyday market participants benefit from staying apprised of China’s incremental efforts to piece together an equity market rally and/or an economic rebound.

There’s something new every other day. None of it works. Indeed, Beijing can’t even reliably engineer one-day stock rallies anymore. On Tuesday, Chinese lenders delivered a “record” cut to the five-year LPR tenor. That’s a mortgage-linked policy rate. In this case, “record” means 25bps.

For what it’s worth, I previewed this on Sunday evening in the Daily. The key one-year MLF rate (off which the LPRs are priced) was kept unchanged this month, but state media suggested the five-year LPR might be cut anyway. It’s rare, but not unheard of, for banks to lower LPRs in a month during which the MLF rate’s unchanged.

As the figure shows, the reduction to the five-year rate was the largest since the PBoC revamped China’s rates regime in August of 2019. The one-year tenor (which for all intents and purposes replaced the legacy lending rate as the country’s benchmark a few months after the new regime was implemented) was left unchanged.

Spoiler alert: This isn’t going to make any difference. The idea, I guess, is to parlay falling prices into a more pronounced housing recovery during peak buying season (in March) by making it cheaper to finance discounted properties. In other words: Prices and rates are lower, why not buy?! I can answer that question: Because nobody has any faith in the leadership. The economy’s badly mismanaged.

As discussed here at regular intervals, including late last month when Pan Gongsheng pre-announced an RRR cut, the problem isn’t on the credit supply side. The issue isn’t the price of credit, nor is it the price of what’s being financed (in this case residential apartments). The problem resides on the demand side, and demand’s a function of confidence. Confidence is abysmal, which means demand’s depressed. It’s just that simple.

You can cut rates as much as you want — and mortgage rates for new buyers were already quite low in China — but it won’t make any difference unless people want to borrow. And people will only want to borrow if they’re optimistic about their economic prospects. Currently, they aren’t. Optimistic, I mean.

I assume this is plain enough by now, but just in case: Xi needs to turn this around in a hurry lest the deflationary mindset become entrenched. The only way to do that reliably is through fiscal stimulus. Federal fiscal stimulus aimed at bolstering consumption, not the kind of fiscal stimulus where the central government bullies municipalities into taking on debt to finance the construction of figurative and literal roads to nowhere.