Concerns Grow after PBOC’s Cut

China’s third interest rate cut in six months has spurred concerns the mainland’s economic slowdown is hitting where it hurts: the labor market.

“The PBOC move validates investors’ assumption that sub-par economic performance will be tolerated by the government only up to a point where it does not pose a serious threat to employment,” Uwe Parpart, head of research and chief strategist at Reorient Group, wrote in a note on Sunday. “That point may well have been reached.”

The People’s Bank of China (PBOC) reduced both the benchmark lending and deposit rate by 25 basis points to 5.1 percent and 2.25 percent, respectively, in response to weaker-than-expected economic activity data, which has raised concerns that the government’s annual gross domestic growth (GDP) target of “around 7 percent” could be at risk.

CNBC

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