China cuts interest rates, reserve ratio
Central bank announces double-barrelled reductions in bid to stem slowdown and spur growth in the country's sluggish economy
The mainland's central bank yesterday announced its fourth interest rate cut in seven months and a reduction for the percentage of deposits banks are required to reserve, in another high-profile measure to spur the country's slowing economy.
It was the People's Bank of China's first time making double-barrelled cuts in interest rates and banks' reserve requirement ratio on the same day since 2008.
The timing of the announcement - coming a day after the Shanghai stock market tumbled almost 8 per cent - sparked heated debate about whether it was meant to comfort embattled stock market investors.
The central bank said the credit-easing move, which takes effect today, was aimed at "supporting the real economy and promoting restructuring [of the economy]".
Borrowing and deposit rates were cut 25 basis points each - the fourth reduction since November. Following the cuts, the one-year benchmark lending rate will stand at 4.85 per cent while the one-year benchmark deposit rate will be 2 per cent.
Banks whose lending to the agricultural sector and small businesses meet the regulators' target will see their reserve requirement ratio slashed by 50 basis points.
"Although China rolled out a slew of measures earlier this year, there are no signs of strong economic recovery yet," said Bank of Communications senior economist E Yongjian. "Those measures have failed to reverse the economy's slowing trend."