David McNamara: Major Chinese stimulus reverberates through markets

The question remains whether measures such as cuts in mortgage rates and lending to equity markets will be enough to boost the Chinese economy

The measures taken included a 20bps cut in the main short-term policy rate, and a 50bps reduction in existing mortgage rates by the Bank of China.

Last week’s actions by the Chinese authorities mark a major short-term stimulus for the domestic and global economies. 

The coordinated action by the monetary and fiscal authorities comes amid a slowing growth profile and a period of deflation over the past year. Within an economy with high levels of debt across many sectors, particularly real estate, a prolonged period of deflation would be particularly painful for highly leveraged Chinese households and businesses.