China’s central bank has asked European financial institutions for advice on dealing with the effects of low interest rates, as the world’s second-largest economy risks slipping into a prolonged period of low inflation.
The People’s Bank of China has sent “ad hoc” requests to at least two European banks this year for insights on the impact of low to zero interest rates on the banking systems in their home countries, according to people familiar with the requests.
The move suggests the Chinese central bank is concerned about a multiyear deflationary environment, which would threaten bank profits and financial stability — similar to what many European countries experienced last decade.