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Pumping Air Into A Flat Tire? China Lowers Rates, Shanghai Composite Drops 7.63 Percent

This is a syndicated repost courtesy of Confounded Interest - Online Course Notes For Financial Markets. To view original, click here. Reposted with permission.

China’s Central Bank, The Peoples’ Bank of China, is trying to fight the dramatic drop in their stock market but lowering rates.

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The one-year lending rate will drop by 25 basis points to 4.6 percent effective Wednesday, the Beijing-based People’s Bank of China said on its website Tuesday, while the one-year deposit rate will fall a quarter of a percentage point to 1.75 percent. The required reserve ratio will be lowered by 50 basis points for all banks to cover funding gaps, it said.

The reaction of the Shanghai Composite stock market? The Shanghai Composite index fell 7.63%.0

shangco p

This is sort of like pumping air into a flat tire. Lots of work, few results.

pump

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