What's going on?

China�s central bank cut a major interest rate on Thursday, an effort to pull its worn-out economy out from under the covers.

What does this mean?

China�s economy has been hitting the snooze button this year, refusing to seize the day and produce the 5% pick-up the government�s been hoping for. Just look at the latest data: retail sales and industrial production were too sluggish to meet expectations in May, with the latter creeping up just 3.5% on last year�s locked-down economy. Frustrated, the central bank�s been cutting rates to get spending up and going, this time chopping its main medium-term interest rate from 2.75% to 2.65%. And while that might not sound like much, three rate cuts in a week are the equivalent of splashing cold water on the face of a stubborn sleeper.

Why should I care?

Zooming out: We used to hang out.
The world�s biggest economies were buddies for decades after China entered the World Trade Organization, with the clique�s fortunes moving pretty much in sync. But then the pandemic�s lockdowns, backed-up supply chains, and political tensions reminded them that you can�t rely on anyone, and countries like the US, UK, and China became increasingly focused on themselves. That�s not the worst deal for active investors: it means individual economies perform more independently, and for every floundering economy, there�s usually one flourishing.

For markets: Decent exposure.
Plenty of colossal US firms make a lot of money from their Chinese businesses ��well, at least they used to. Now that China�s sagging economy is weighing on the likes of Nike and Est�e Lauder, their share prices are reflecting that extra burden. But China�s government isn�t known for half measures, so these policy moves are likely just the warm-up. So if and when the country whips out its big bazooka (oo-er) and fires out cash, even US companies should catch some notes.