Opinion: Why China’s Policy Rate Cut Has Only Limited Impact on the Economy

When China’s central bank shaved 10 basis points off the seven-day reverse repurchase rate on July 13, the move was met with cheers as some guessed that the change would lead to lower interest rates across the money market and perhaps give the economy a boost.

However, they probably shouldn’t get their hopes up.

Seven-day reverse repurchase agreements, or repos, are a major tool that the People’s Bank of China (PBOC) uses to pump money into the financial market.