Merrill’s Ting Lu Says Rate Cut Is Good for State-Owned Firms

Ting Lu, head of Greater China Economics at Merrill Lynch Asia Pacific Ltd., comments in an e- mail on China’s decision to cut interest rates for the first time since 2008.

“The government is more worried about growth. May and 2Q data might be below consensus (markets expect 2Q GDP at 7.9% vs ours at 7.6%). Deposit rates actually up, while minimum lending rate actually down about 90bp. Good for big SOEs, but impact on SMEs might be small (depending on liquidity). Negative to banks, but their profits are too high anyway.”

“Active government reactions support our view of moderate rebound in 2H.”

“Though the PBOC seemingly give banks more flexibility, deposit rares will quickly reach the upper limit.”

To contact Bloomberg News staff for this story: Zheng Lifei in Beijing at

To contact the editor responsible for this story: Nicholas Wadhams at

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