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Chinese stocks listed in the U.S. are experiencing a downturn as Beijing implements a reduction in its primary lending rates.
What Happened: On Monday’s pre-market, the shares of Chinese companies listed in the U.S. saw a decline during Monday’s pre-market session, according to Benzinga Pro. This follows Beijing’s decision to reduce its primary benchmark lending rates by 25 basis points.
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At the time of reporting, Alibaba Group Holding Ltd – ADR (NYSE:BABA) experienced a 1.99% drop, while rival PDD Holdings Inc. (NASDAQ:PDD), parent company of Temu, fell by 1.96%. Electric vehicle manufacturers Li Auto Inc. NASDAQ: LI) and NIO Inc. (NYSE:NIO) saw declines of 1.98% and 2.30%, respectively. Additionally, Baidu, Inc. (NASDAQ:BIDU) decreased by 1.28%, and JD.com, Inc. (NASDAQ:JD) was down by 0.78%.
Bloomberg reported that investors are assessing the impact of commercial bank rate cuts amid discussions that only government spending might revive the economy. The People’s Bank of China (PBOC) announced the one-year loan prime rate (LPR) is now 3.1%, and the five-year LPR is 3.6%.
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CNBC reported that despite these monetary measures, experts have emphasized the necessity for fiscal stimulus, noting that the real challenge is the lack of demand in China.
Why It Matters: The reduction in China’s lending rates is part of a broader strategy to stimulate economic growth amid ongoing challenges. The economic recovery in China has been sluggish, with a noticeable decline in consumer demand and industrial output. In recent months, the Chinese government has been under pressure to implement measures that could boost economic activity. However, the effectiveness of monetary policy alone has been questioned, with experts like Shane Oliver advocating for increased fiscal measures to address the demand shortfall.
