China's Rate Cut and Stimulus Measures Disappoint Amid Yuan Risks

China has cut its one-year benchmark lending rate by 10 basis points to stimulate credit demand and boost the economy, but surprised markets by keeping the five-year rate unchanged amid concerns about a weakening currency. The recovery in China's economy has slowed due to a property slump, weak consumer spending, and declining credit growth. However, the pressure on the yuan limits the room for deeper monetary easing, as wider yield differentials could trigger capital flight. The unexpected rate outcome is seen as negative for China's growth outlook and the yuan exchange rate.