負利率時代 (fulilv shidai): Negative interest rate era

The People's Bank of China announced on Friday it was cutting both interest rates and the reserve requirement ratio again to boost the economy.

The interest rates for one-year loans and deposits have been lowered by 25 basis points to 4.35 percent and 1.5 percent respectively, and the RRR for financial institutions has been lowered by 0.5 percentage points in order to further reduce the cost of financing.

After this move, the benchmark interest rate for one-year renminbi deposits has been reduced to 1.5 percent, which is 0.1 percentage points lower than the year-on-year increase of September's consumer price index. It has thus been suggested that China has formally stepped into "the era of negative interest rates" again, which would be the fourth time since the 1990s.

But the authorities disagree. Sheng Songcheng, director of the statistical survey department with the People's Bank of China, published an article on Monday that said commercial banks' weighted average interest rate for new one-year deposits is 2.02 percent, which is higher than the increase in September's CPI.

Also, the rate of return of many alternative saving products on the market is much higher than deposit interest rate. Thus China is still in a period of "positive interest rates".