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China To Consumers: Please Borrow This Cheap Money!
There were rate cuts in China on Monday. String pushin'.
If you long ago gave up trying to understand which rate is the "key" rate in China, who sets it and when, you'll be forgiven.
Here's a flash test for the "pros" among you: Which rate's the Chinese policy rate and where is that rate currently?
If you can answer that, congratulations: You have no life. I'm just kidding. But congratulations are in order. Because if I asked that question to 100 Wall Streeters at random, and I didn't acciden
It’s interesting that the PBoC has issued specific instructions prohibiting the illegal use of credit for investment in the equity market. This indirectly addresses the question many individuals have about whether they should invest their hard-earned money.
Can you elaborate? I don’t follow China enough to know what that means.
One could obtain credit at, say, the one-year MLF rate, but the margin rate from brokers is significantly higher. In a country with thousands of years of gambling tradition, it’s easy to predict what might happen: loans applied for one purpose, such as ‘xyz,’ are actually used for equity trading instead. As a result, the PBoC has issued a warning that credit must not be illegally diverted into A-share markets.
I guess the government wants companies to buy shares back to lift prices, but not encourage margin trading by investors?
To me, all lip service. I guess there might be one to two stupid enough co. will buy back. It’s doomed from the very beginning in 1990s, which should never exisit in the governance system: You are not a shareholder despite of holding co. shares! (rsch some background of the A-share, B-share, H-share structure if one is interested in)
Thanks for the chart. I think Chinese new mortgage rates must now be at or below 3%? PBOC has pushed banks to lower rates on existing mortgages (4%-ish) to the new mortgage rate. That latter move should be a fiscal stimulus on $5TR of existing mortgages, of $25-50BN depending on whether banks are compelled to keep repricing existing mortgages with each cut to the new mortgage rate.
PBOC seems to be the government entity most effectively executing stimulus.
I wonder if publicly out-performing as a top-level government official is good or bad for career prospects, in Xi’s CCP?
Also, please run your “excess savings” down to zero and take on debt to finance everything from major purchases to groceries and tee shirts. It’s the American way!