China’s biggest interest-rate cut in 11 years highlights government concerns that the country risks spiraling unemployment, social unrest and the deepest economic slowdown in almost two decades.China needs an annual GDP growth rate of something in the 6% to 8% range to provide jobs for all the people moving from the countryside to the cities. Anything less than 6% GDP growth will mean rising unemployment - and rising unrest. The rate cut yesterday was 108 basis points to 5.58% and follows the announcement of a $586 billion stimulus plan a few weeks ago.
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“China’s trying to draw a line under unemployment and civil unrest,” said Glenn Maguire, chief Asia-Pacific economist at Societe Generale SA in Hong Kong.
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Gross domestic product may grow 5.5 percent next year, the slowest since a 3.8 percent expansion in 1990 ...
But what happens to U.S. interest rates if China slows their investment in dollar denominated assets?
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