In an attempt to revive the economy hurt by real estate debt problems, the Chinese central bank announced a sudden and strong interest rate cut, which has dealt a severe blow to the Chinese economy at a sensitive time for Chinese supreme leader Xi Jinping, who is seeking to secure a third term in power. This comes as a good chunk of revenue for the Chinese government has been affected as many real estate projects are lying unfinished.
Due to the drop in revenue, banks in China’s Henan province had frozen depositors’ funds, resulting in a slew of large-scale protests. In view of the troubled situation, on August 15, China’s central bank suddenly announced a strong interest rate cut. This was the second cut in this year, reported European Times. As per analysts cited by the media portal, these cuts in interest rates will not be able to push the economy forward and will continue to pose challenges. Last year, the Chinese Communist Party’s (CCP) accepted that it had no way to deal with the triple whammy of “shrinking demand, supply shock, and weakening expectations.”
To make matters worse, there is a backdrop of the Russian-Ukrainian war and China’s high-handedness of the zero-COVID policy. China closed the entire Shanghai in order to contain the coronavirus and this has resulted in accentuating China’s economic market volatility.
The impact of the Shanghai lockdown was so great that in the month of May, Chinese Premier Li Keqiang held a rare “100,000-person meeting”. “It seems that the most challenging time is worsening,” said the media portal. Xi Jinping is expected to seek a third time in power in November at the 20th Party Congress. At the time when Xi came to power in the year 2012 and detailed his “Chinese dream,” he did not anticipate how difficult it would be for him to win an unprecedented third term as the country’s leader.