A Case Study on China Cuts Interest rate 0.25% from the point to 4.35%
- How the global leading financial market will be in fluctuated by the Chinese decision of cut interest rate?
Answer: Through the decision of Chinese Economy cut interest rate 0.25%, the world leading financial markets gets gaining on their stock markets. Because of the cutting decision of interest rate, the global investor will not invest more in China. That is why they just go the invest on others company outside China. As an instance we can say, after cutting decision of interest rate; benchmark FTSE 100 index rise 1.3%, Glencore share rise 7% and Fresnillo 4%. As well as the Dax in Franfurt rose rise 3%.
- Due to cut the interest rate on those countries who are recovering from recession – is there any impact?
Answer: Actually when economic growth less than 2% it indicates the recession of economy. But in the time of global recession Chinese economic growth rate was 2.5%. It implies China could recover the recession perfectly and helped the other world to get recovery. And still China hold 17% of the world economy. That means the China’s impact on the global growth larger, so is the potential contribution it can make to increased demand for goods produced by the other countries.
- Due to cut interest rate by China, how it will impact the global investment towards China in financial and stock market?
Answer: In 2012 IMF said, China got the excessive investment which increase their debt ratio. That’s why China took the decision to reduce interest rate 0.25% from point to 4.35%. Also in the case of over investment the projects become inefficient economically. May be the global invest will be lower in China, and their financial market will get less investment than previous time also their stock market lose index for some percentiles. Whatever it is, China want to make interested their people to take loan and start business by their consumer also.
- Do you think is there any investment shift from local investors? Will it vibrate the market?
Answer: Yes, some investor may will get interest to invest in other countries to get highest interest rate. But China just cut 0.25% from interest rate. In the case of global invest may have some extra tax barriers which will lead the cost in above than the 0.25% amount. If the local investor make investment in China and the people get the loan at lowest interest rate to make business, may it will create positive vibration for Chinese financial market.
Informative papers to make those question and answers are given below in PDF.