TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
China's central bank cuts two key rates to boost economy
Change text size
Gift Premium Articles
to Anyone
Share the best of The Jakarta Post with friends, family, or colleagues. As a subscriber, you can gift 3 to 5 articles each month that anyone can read—no subscription needed!
The headquarters of the People's Bank of China, the Chinese central bank, are pictured in Beijing in August 2011. (AFP/Mark Ralston)
C
hina's central bank on Monday said it had cut two key interest rates to historic lows, in the latest move by Beijing to boost sluggish spending and kickstart the world's second-largest economy.
The cuts come just days after the country posted its slowest quarterly growth in a year and a half, underlining the deep economic woes the country faces.
Leaders are targeting annual growth of five percent this year, but that goal is being challenged by weak consumption and a prolonged and debilitating debt crisis in the colossal property sector.
The one-year Loan Prime Rate (LPR), which constitutes the benchmark for the most advantageous rates lenders can offer to businesses and households, was cut from 3.35 percent to 3.1.
The five-year LPR, the benchmark for mortgage loans, was cut from 3.85 to 3.6.
Both rates were last reduced in July and are sitting at all-time lows.
Data showed Friday the economy grew 4.6 percent in the third quarter, its slowest rate in a year and a half.
Authorities acknowledged a "complicated and severe external environment... as well as new problems of domestic economic development".
Beijing has said it has "full confidence" in achieving its annual growth goal, but economists say more direct fiscal stimulus is needed to revive activity and restore business confidence.
The disappointing data came after weeks of announcements and news conferences about an eagerly awaited stimulus plan, though investors say they are still waiting to see more details.
The country's top banks on Friday cut interest rates on yuan deposits for the second time this year in another potential boost to spending.
Central bank chief Pan Gongsheng also on Friday said that authorities were considering a further cut to the amount commercial lenders must hold in reserve before the end of the year.
Months of sluggish spending has raised fears that China will dip back into deflation after it ended a months-long stretch of falling prices early this year.
Zhang Zhiwei, President and Chief Economist of Pinpoint Asset Management, said Monday's rate cut was "an encouraging sign".
"The monetary policy has clearly shifted to a more supportive stance since the press conference on September 24. The real interest rate in China is too high," he said.
