Morning Brief – Chinese bank cuts

A very slow Asian session ahead of a busy week of central bank action, however, several Chinese commercial banks cut interest rates on a range of yuan deposits from Monday.

The move comes after last week’s bank cuts in China, following their larger peers in a coordinated move to ease pressure on profit margins, and also overall economic slowdown.

Chinese bank action includes, Industrial & Commercial Bank of China, China Construction Bank, Bank of China, Bank of Communications, and the Agricultural Bank of China.

And policymaking banks include the Agricultural Development Bank of China, the China Development Bank, and the Export-Import Bank of China.

Non-state banks cut rates today. Joint-stock commercial banks cut deposit rates today. Banks including China Merchants Bank, China CITIC Bank and China Minsheng Banking Corporation.

The deposit rate cuts follow a similar move by China’s biggest state lenders on Friday and marks the second such industry-wide cut within a year, with previous action taken in September.

Analysts expect the deposit rate cuts will provide more room for a further cut soon by the central bank in the reserve requirement ratio (RRR) to expand credit and boost investment spending.

Later this week we will get the People’s Bank of China setting the rate on its Medium-Term Lending Facility (MLF). The MLF will be set on Thursday, the 15th.

The chance of a cut to the rate, expected of around 10 basis points for the one-year, is firming up with more Chinese banks cutting deposit rates today following cuts from the largest six state banks last week.

Kiwi Bank notes that for the PBOC “Unlike other central banks, there’s pressure to keep policy loose and supportive.” And “China’s post-Covid recovery looks to be stalling.”

Also “Trade data have also been rather lacklustre. Both import and export growth have not been as strong as expected. reflecting sluggish internal and external demand.”