China makes surprise cut to rates as economy falters

(Sharecast News) - The People's Bank of China made a surprise cut to interest rates on Tuesday as it looked to stimulate economic demand amid a sputtering recovery.

Defying expectations, the People's Bank of China cut the rate on 401 billion yuan ($55.25bn) worth of one-year medium-term lending facility (MLF) loans to some financial institutions by 15 basis points to 2.50% from 2.65% previously.

The cash injection was to counteract factors including tax payments in order to "keep banking system liquidity reasonably ample", the PBOC said in a statement.

China's cut in rates came amid a raft of economic data published on Tuesday that missed estimates and growing concerns around the stability of its troubled property sector after developer Country Garden warned of a massive $7.6bn loss and suspended bond payments.

SPI Asset Management partner Stephen Innes said: "While fully warranted but in itself, however, it is unlikely to have much lasting benefit in the absence of government spending."

"The monetary policy effects are most likely to be neutral or could even be perceived as unfavourable in the sense that policymakers are starting to hit the panic button, especially in the face of a local confidence crisis. While Beijing has already done some things to ease the property sector's tensions, it's a day late and a Yuan short."

Reporting by Frank Prenesti for Sharecast.com