China instructs big banks to reduce interest rates to improve economy – indications of debt crisis has become a grave issue

Beijing – The ruling communist government of China has informed the leading banks of the country to reduce the interest rate. Reduce the interest rate from half to one per cent, it has been said in this information, a Western newspaper has said in its news. For the second time in the last year, the ruling government of China has informed its banks to reduce the interest rate. Here the news of reducing the interest rate has come to the fore; that’s why some Western media claimed that the problem of loans taken by China’s ‘local governments’ means the governments of the provinces have gone out of control.

Moreover, several financial institutions and economists had predicted that after the lifting of the Corona restrictions, the Chinese economy would boom and the process of improving the global economy would begin. But in reality, the figures coming out of China have proved disappointing. In the last month, information about the decline in China’s production sector, including retail, investment and housing, was published. After that, the number of unemployed in China also increased significantly.

Furthermore, although the ruling government of China has made statements that the economy is under control and there is no reason to worry, yet in reality, the steps taken by the Chinese agencies have proved to be unsettling to investors and economists. Corona’s restrictions were continuing in such a way the central bank of China had informed the leading banks of the country about cutting the interest rate. Instructions have been given to reduce the rate for the second time within a period of a few months. This shows that all is okay in China’s economy, say analysts.

In the last few days, advanced Western media like ‘Bloomberg’, ‘Financial Times’, ‘Le Monde’, ‘Reuters’ have started paying attention to the dangers in China’s economy. The newspapers ‘Financial Times’ and ‘Le Monde’ claimed that the increasing debt burden on China’s ‘local governments’ could be a big problem. China’s economy currently has a debt of 23 trillion dollars. Out of this, more than nine trillion dollars of debt is said to be on China’s ‘local governments’.

In the last two years, China’s ruling government has aggressively implemented strict rules in real estate, technology, gaming and other major industry sectors. The local administrations of China have felt the shock of this action. Due to increasing evidence of various industries and companies becoming bankrupt, there has been a big decline in the income received by the local administrations. Over the past month, the Wuhan administration has also placed advertisements in newspapers asking companies to repay loans. Bloomberg and Reuters have reported that industrial production and trade in China continue to decline. There has also been a decline in imports and exports, including the ‘PMI index’, these mediums have said.

Meanwhile, the rising debt burden and continuing decline in industrial production and trade have become a matter of concern for international investors. A few days ago, in a survey, Asian investors opined that China’s debt problem could prove to be the biggest headache in the coming period.

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