If anyone had doubts about the slowdown in the Chinese economy, the Asian giant's Central Bank has just dispelled them with an unexpected cut in the medium-term interest rate (one-year loans). The cut was 15 basis points, to 2.5%, the second cut since June. The decision comes amid a barrage of bad news for the Chinese economy:

• Industrial production grew 3.7% in July, below the 4.3% estimated by economists.
• Retail sales growth slowed to 2.5%, below the expected growth of 4%.
• Investment in fixed assets grew by only 3.4% in the first seven months of the year, below the 3.7% expected by economists.
• Investments in real estate contracted by 8.5% during the same period.
• Bank lending in July fell to its lowest level in 14 years.

At the July meeting of the Politburo of the Communist Party of China, the need to add more fiscal and monetary stimulus to support the economy was noted. This rate cut is one of the first concrete steps in that direction, according to analysts.

One of the collateral problems of this strategy is the weakening of the yuan, which this week reached its lowest level since November. With the US Federal Reserve maintaining its policy of raising interest rates, the spread between Chinese and US 10-year bonds is currently more than 160 basis points, the widest gap since 2007, which is causing capital flight from China.