Markets

Expert: China cut means nothing; QE by PBoC coming

China's weak spot
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China's weak spot

While many investors view China's decision to further cut its benchmark interest rates as a positive sign, John Rutledge, the chief investment strategist at Sanafad, said it makes "no difference whatsoever" for the Chinese economy. (Tweet This)

"The Chinese economy is obviously weak. The weakness is centered in industry, [and] the Chinese currency is up more than 15 percent against other emerging market currencies in the last year, and their biggest customers are weak," Rutledge said Tuesday in a CNBC "Squawk on the Street" interview, referring to the U.S. and Europe.

China's central bank, the People's Bank of China, said Tuesday it had cut interest rates for the fifth time in nine months after another poor trading session in which the Shanghai Composite shed 7.6 percent. Japan's Nikkei also fell 3.96 percent overnight.

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Rutledge added that the central bank's move to lower interest rates signals that the country is aware that its economy is slowing down and that it's seeing large sums of money leaving.

"In China, the reserve requirement plays a different role than it does in the U.S. and Europe. When capital flows into China, it flows into the banks, and the central bank raises the reserve requirement to sop it up. When capital flows out, it lowers the reserve requirement," he said.

He added that, as China's economy keeps slowing down, its central bank may enact quantitative easing.

"[With] slowing China and still-falling markets, they're not going to do fiscal stimulus next time around to build railroads; they're going QE," he also said. "I think we should be looking forward to much bigger announcements from the Chinese central bank."

Healthy signs in international trade
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Healthy signs in international trade

Nevertheless, Stephen Fenwick, DHL Express CEO for the Americas, said Tuesday in another interview that he believes concerns over China's growth have been overblown recently.

"From a global point of view, we're actually seeing good growth, and I think those fundamentals are still there," Fenwick said. "I know there's still a lot of discussion about China, but China is still a big exporter for us and we're seeing good growth."