Commentary: China’s Window to Cut Interest Rates Is Open
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A year has passed since Beijing launched its “package of incremental policies” last September, a macro-control effort that has since restored a measure of stability to market expectations. Even after weathering the shock of American tariffs, the momentum of improving sentiment has continued, thanks to targeted policy countermeasures.
In the year ending Sept. 24, the A-share market index surged by more than 60%, with market capitalization rising nearly 50%, according to data from the Wind-A index. After a period of intense volatility, both the yuan’s exchange rate and market interest rates have returned to levels seen around the time of last year’s Central Economic Work Conference. The yuan, which had weakened from 7.00 to 7.35 against the dollar, has since recovered to 7.10. The 10-year government bond yield, after rising from 2.00% to 2.26% and then falling as low as 1.58%, has rebounded to above 1.80%.
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- China’s A-share market index rose over 60% and market capitalization grew nearly 50% in the year since new policies were introduced.
- Despite stable markets, challenges remain: youth unemployment is 18.9%, and 30% of industrial firms operate at a loss.
- Improved conditions—such as eased financial risks and U.S. Fed rate cuts—open a window for China to lower interest rates to stimulate the real economy.
- China Construction Bank
- Zhang Tao, a doctor of economics, works in the Financial Markets Department of China Construction Bank. His expertise is in economic matters, suggesting the bank employs individuals with a strong understanding of financial markets and economic policy.
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