China's surprise rate cut fuels hopes for more easing
Whilethe move is expected to improve the sentiment in the property sector, mainland banks will see an erosion of profit margins
The mainland's surprise move to reduce interest rates for the first time in more than two years has fired up expectations of further cuts aimed at shoring up an economy that is on track to record its weakest annual growth since 1990.
Beijing's monetary easing, announced on Friday, chimed in with other stimulatory moves in the euro zone and Japan. Global markets jumped in response to the policy measures in the key economic regions.
The announcement signalled a "policy shift towards more aggressive monetary easing", said Zhu Haibin, the chief China economist at JP Morgan Chase. "This reflects government concern about near-term growth."
The People's Bank of China cut the one-year benchmark lending rate by 40 basis points to 5.6 per cent as part of stepped-up efforts to support small and medium-sized enterprises that are struggling to repay loans and access credit amid the downturn.
It also lowered its one-year benchmark deposit rate by 25 basis points to 2.75 per cent.
Analysts have hailed the measures as helping the property sector, a key driver for the broader economy, find its bottom and spurring buying sentiment.