China cuts interest rates again, to boost sluggish economic growth
China cut interest rates Sunday for the third time in six months to boost sluggish economic growth and announced that it is giving banks more flexibility in setting rates paid to depositors in a new step to make its financial system more market-oriented.
The central bank's rate cut reflects the communist leadership's growing urgency about reversing a deepening slump that threatens to cause a politically dangerous spike in unemployment.
Economic growth has fallen to its lowest level since the aftermath of the 2008 global crisis, and exports fell by 6.2 per cent in April. Surveys of manufacturers showed factory employment in April fell to its weakest level in a year.
Citing "downward economic pressures," the People's Bank of China said Sunday that it would cut the rate on a one-year loan by commercial banks by 0.25 percentage point to 5.10 per cent. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.25 per cent.
Interest rates were also cut on November 22 and then again on March 1.
Beijing has been expected to ease monetary policy since the Communist Party leadership promised to shore up growth following a meeting two weeks ago.
a 'new normal'
Communist leaders have affirmed their commitment to a "new normal" of slower, more sustainable growth but are very sensitive to the potential for political unrest in the event unemployment spikes up. The country's top economic official, Premier Li Keqiang, said in March that the government would respond if the employment situation worsened.
The state-owned banking industry lends mostly to state companies, so the biggest impact of the interest rate reduction would be on their financing costs.