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China shares fail to lift on the central bank’s rate cut


Chinese shares continued to lose ground despite the central bank’s latest effort to reassure traders. The mainland’s benchmark Shanghai Composite was down 1% in early trading to 2,934.27 points. The index had already fallen about 16% this week, sending shockwaves through global markets.

The dramatic losses and volatility in China has shattered investor confidence and led to sharp falls in Asia and the US over the past days.

On Tuesday, China’s central bank cut its key lending rate by 0.25 percentage points to 4.6% in an effort to calm stock markets after the past days’ turmoil.

It is the fifth interest rate cut by the People’s Bank of China since November last year.

Hong Kong’s Hang Seng index fared slightly better than the mainland, trading flat at 21,401.73 points.

China economy woes

Chinese shares had experienced a year-long rally – mainly fuelled by investors borrowing money to buy shares – which came to an end in June.

The Chinese government then intervened in financial markets to try to maintain momentum in the economy.

Two weeks ago the central bank devalued the currency, the yuan, to boost exports – this raised fresh concerns that China’s economy could be in worse shape than previously thought.

Given China’s central role in world trade, a slowdown in the world’s second largest economy would likely reverberate around the globe.


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