China springs a leak before springing rate cut

By Koh Gui Qing

BEIJING (Reuters) – More than two hours before China cut its interest rates on Sunday afternoon, the financially sensitive information was making its rounds among users of China’s popular social messaging app WeChat.

The WeChat message, seen by Reuters at 2:41 p.m., was bang on the money; it said China would cut interest rates by 25 basis points and raise the ceiling for deposit rates to 1.5 times the benchmark.

The information was attributed to the People’s Bank of China (PBOC), and the WeChat message, which redirected readers to an anonymous web page, did not carry the central bank logo or any official government stamp.

When the real announcement was released shortly after 5 p.m. local time, it matched word for word.

In China, information often leaks ahead of official announcements, and as the world’s second-biggest economy, that can swing financial markets at home and abroad.

Song Qinghui, a prominent financial news commentator in China, said he had seen the leak “exploding” in WeChat circles as early as Sunday morning.

“There are so many such leaks in China. Although offenders can be sentenced to the stiffest possible punishment, no one investigates the leaks,” Song said.

The central bank and TenCent Holdings, which owns and runs WeChat, were not immediately available for comment.

China has tried to deter such leaks. An employee at a Chinese asset management firm and a researcher at the central bank were jailed for up to six years in 2012 when they were found to have orchestrated leaks of market-moving economic figures.

While monthly releases of economic data are no longer leaked as they were in 2008, sometimes days in advance, screenshots of official documents with policy announcements still find their way online in advance.

Just this month, news that China will more than triple the number of state firms allowed to trade commodity derivatives was leaked when pictures of part of the official document announcing the change were posted on the Internet.

“From a fairness point of view, policies need to be kept a secret because there is definitely a first-mover’s advantage in the short-term,” said Zhou Hao, an economist at ANZ Bank in Shanghai.

Ironically, the effect of such leaks can be blunted by the fact that mainland financial markets are riddled with rumor.

Another WeChat message that went around on Sunday had falsely said the PBOC would cut rates by 50 basis points later that day.

(Additional reporting by Paul Carsten and the Beijing Newsroom; Editing by Will Waterman)

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