-->The Central Bank of China, at its quarterly monetary policy meeting today, followed the latest move by the Fed and lowered
its rediscount rate by 25 basis points to a record low of 1.375%, in line with market expectations. Cumulative since
December 29, 2000, rates have been cut by 337.5 basis points. The rates on accommodation against secured loans and on
temporary accommodations have been cut by the same magnitude, to 1.75% and 3.625%, respectively.
As mentioned in our latest piece published this morning,"Another Rate Cut?", we remain skeptical of the effectiveness of
monetary easing. The official rediscount rate no longer guides money market interest rates. Low rates in the market have
resulted from fundamentally weak demand for funds for investment and more cautious lending to corporates that left the
banking system flooded with liquidity. Another 25-bp cut in the policy rate will likely prove to be largely symbolic, we
believe, as it keeps the policy rate above the market rates (the overnight rate hit a record low of 1.161% on June 25), and
provide a limited boost to economic activity.