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- China's economic performance fell below analyst expectations, per July data released by the Bureau of Statistics.
- China's central bank surprisingly cut key policy rates less than an hour before the economic data was published.
- The PBOC cut its one-year medium-term lending facility rate by 15 basis points to 2.5%, the biggest reduction since 2020.
Less than an hour before releasing another series of disappointing economic indicators, China's central bank unexpectedly cut key policy rates, signaling the government wants to ramp up efforts to turbo-charge the country's post-pandemic recovery.
The People's Bank of China slashed its one-year medium-term lending facility rate by 15 basis points to 2.5%, the deepest cut since 2020.
The rate — which relates to loans to financial institutions — was lowered by 10 basis points in June and is now at the lowest level since it was launched in 2014.
The central bank also cut a short-term policy rate by 10 basis points.
Of the 15 analysts polled by Bloomberg, 14 had expected China to keep the lending rate unchanged.
On Tuesday, China posted yet another round of disappointing economic data. Retail sales — a consumption gauge — rose by 2.5% on-year in July, missing a 4.5% target per analysts polled by Reuters. Exports in July came in at 2.016 trillion yuan, or almost $278 billion, marking a 9.2% drop.
Even more surprisingly, China omitted any mention of youth unemployment statistics in its July report card. Youth unemployment had soared to a record high of 21.3% in the second quarter of 2023.
China's statistics bureau spokesperson told Bloomberg that the youth unemployment rate won't be released from August until surveying methods are improved.
In the same Tuesday announcement, China's statistics bureau said domestic demand remains insufficient, and the foundation for economic recovery needs to be further consolidated.
"We must intensify the role of macro policies in regulating the economy and make solid efforts to expand domestic demand, shore up confidence and prevent risks," the bureau said.
Even so, at least one analyst thinks today's rate cuts won't be enough to keep China's economy from slipping into a recession unless the government steps up its support.
All the main activity indicators undershot consensus expectations in July, with most either stagnant or barely expanding in month-on-month terms, Julian Evans-Pritchard, the head of China economics at Capital Economics wrote in a Tuesday note seen by Insider.
"And with financial troubles at developers such as Country Garden likely to weigh on the housing market in the near-term, there is a real risk of the economy slipping into a recession unless policy support is ramped up soon – today's rate cut won't cut it," he wrote.
August 14, 4.51 p.m.: The story has been updated with an analyst's comment.