After Interest Rates are cut, Where will the Money Flow?
The People’s Bank of China announced, from Nov. 22,
the RMB lending and depositing rates decreased,
but this rare move did not surprise the public.
Experts believe that, as China’s economy continually
slows down, it has brought great pressure
upon the Chinese Communist Party (CCP).
In order to achieve a so-called good economic growth data,
the CCP was forced to lower the interest rates.
However, because China’s political and economic system
have become so rotten, it is now impossible to save.
The money lenders will not put the loaned money back
into the real economy.
Once the floodgates to cut interest rates are opened,
subsequent inflation will dilute the assets of the people,
which will accelerate the demise of the CCP.
People’s Bank of China announced, from Nov 22,
the benchmark interest rate of RMB loans and deposits decreased.
One-year benchmark lending rates were cut by 0.4 points
to 5.6 percent; one-year benchmark deposit rates were cut
0.25 points to 2.75 percent,
while the upper limit of floating range deposited interest rates,
was adjusted from the prior 1.1 times of the benchmark, to 1.2 times.
Other benchmark lending and deposit rates
were adjusted accordingly.
United States “Wall Street Journal" said that the decision
of decreasing central bank’s interest rate was forced
due to political and market pressure,
which means Central Bank admits that the prior sporadic initiatives
to boost the weakened economy, did not work.
However, due to the market downturn, lower lending rates
cannot guarantee the borrower can obtain a loan.
China Mainland Sina Financial commented that cutting
the interest rates,
is quite likely to be the worst negative type of news
for commercial banks, even a “fatal" blow.
US-based economic commentator Jason Ma:
“This time the loan interest rate was cut a little more.
The purpose of lowering the interest is to divert
and stimulate the entire economy into the direction
of developing real economy,
instead of forcing to draw out money from the bank to consume.
Once there is a first time cutting of interest rates,
then to cut interest rates might become a regular means
of adjusting the economy.
Let’s see it step by step in the future. But at least it’s seen
that the current economic slowdown makes the CCP worried."
Before cutting the interest rates, the CCP’s Central Bank
has taken a series of small-scale easing measures.
But “Wall Street Journal" believes that these measures
did not promote the lending willingness of banks
and the borrowing willingness of businesses.
On Nov. 6, the Central Bank also acknowledged,
by the so-called long-term lending tools,
a total of 769.5 billion RMB ( US$125 billion) has been injected
into Chinese banks,
including the injection of 500 billion RMB (US$ 81 billion)
in September and 269.5 billion in October.
Mainland enterprises observer Mr He Junqiao:
“This money (lent out from the bank) will either flee away
from China, or be used for paying the debt,
basically the money was not used for
Cutting the interest rates has basically made no difference.
For the ordinary people, cutting the interest rates
is no good thing, because the inflation soon intensifies.
Cutting the interest will allow some people to make lots of money,
some to flee away from China with the money and some
of the money to go outside of China.
The ordinary people just make some money
from their wages at most.
So the final end will depend upon the extent of the people’s
endurance and safeguard stability of the government."
“Sina Financial" columnist Yu Fenghui believes that
cutting the interest rates leads to a much larger gap
between the control of interest rates and the market price,
hence allowing money from the banking system flow into
the non-regulated usury market and real estate market,
resulting in higher financing costs of the enterprises.
At the same time, the interest rate cuts widens
the interest rate gap between China and America,
which leads to an increased outflow of hot money,
tightening domestic liquidity, and even the financial risks
related to the withdrawal of hot money.
He Junqiao: “Everyone is making money from the banks.
If they cannot make money from the banks,
then they raise the money from society by all means.
Whether government owned or private enterprises,
even the banks, they are all financing from society.
In fact, many companies have already become insolvent.
They all sustain themselves by the leverage system.
So now the financial field, manufacturing field and real estate
are all actually a Ponzi scheme."
Mainland Financial critic Niu Dao: “Everyone left once
the term expired.
They are all fundamentally irresponsible for such debts.
So we can speak, when they prepare for the project,
they are ready to engage in this bad debt.
When they lend out the money, they are not going to let the
borrowers repay the debts.
So the entire commercial banks will go awry."
“Sina Financial" indicates that the rate cuts will
drive the loans flowing to the stock exchange market,
Internet banking, and real estate market.
Mainland financial commentator Niu Dao believes that
this rate cut is entirely for the “bailout", however,
this not only cannot stimulate the economy, but also leads
to a sharp depreciation of RMB for the long term.
Niu Dao: “Printing too much banknote leads
to high prices of real estate.
The CCP want desperately to save the property market,
they do not want the bubble bursting,
and even induce the people to continue buying homes.
So the CCP could not sustain the following two years,
absolutely could not sustain over the plight.
Whatever measures they use
for saving the economy, it is no use."
He also believes that the CCP’s political system
and economic system both have been rotten
so indeedt it is impossible to save.
Any measures cannot really solve
the economic problems the CCP are now facing.
Interview & Edit/Liuhui Post-Production/ShuCan