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SHANGHAI: China stocks slipped on growth concerns on Monday after data showed economic activities and credit expansion slowed sharply in July even as the central bank unexpectedly cut key rates to support the COVID-19 hit economy. The CSI300 index closed down 0.1% while the Shanghai Composite Index ended almost flat.

Some growth-oriented stocks, however, gained from lower rates, with the new energy sub-index surging more than 3%.

The People’s Bank of China (PBOC) on Monday lowered the rate on one-year medium-term lending facility (MLF) loans to 2.75% from 2.85% and the seven-day reverse repos rate to 2% from 2.1%.

“The 10 bps MLF rate cut today was a totally unexpected move,” said Kaiwen Wang, China strategist at Clocktower Group.

“The move reflects that policymakers were shocked by the July credit data as well as a comprehensive deceleration in economic activities.

China’s activity indicators from industrial output to retail sales missed forecasts, adding to slowdown concerns as new bank lending tumbled more than expected and broad credit growth slowed.

“Economic activities weakened in July. Domestic demand softened due to COVID outbreaks in many cities and the worsening sentiment in the property market,” said Zhiwei Zhang, Chief Economist at Pinpoint Asset Management.

Several Chinese cities, including manufacturing hubs and popular tourist spots, imposed lockdown measures after fresh outbreaks of the more transmissible Omicron variant were found, casting doubts on a strong economic rebound.

The unexpected rate cuts soothed some worries in the stock market about the exit of crisis-mode monetary easing, with the blue-chip CSI300 jumping as much as 0.7% in early morning trade before gains were erased.

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