The Chinese central bank announced a surprise cut in a key policy rate, a move widely seen as part of fresh efforts to reinvigorate the country’s slowing economy.
The apex bank also doubled subsidies for electric vehicles bought to replace older cars.
The People’s Bank of China said it cut its lending rate for one-year medium-term policy loans by 20 basis points to 2.3 percent, AP reported.
That is the biggest rate cut since the world’s second-largest economy was slammed by the Covid-19 pandemic in 2020.
The rate on 7-day loans was reduced to 1.7 percent.
Major state-run banks cut deposit rates, meanwhile, to relieve pressure on their finances, reducing the rate paid on one-year fixed deposits by 10 basis points to 1.35 percent, the Xinhua News Agency reported, citing official rates released Thursday by the country’s “Big Four” banks – Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank.
The banks cut deposit rates three times last year and this was the first reduction for 2024, it said.
Earlier this week, the Chinese central bank cut several of its other lending rates, sticking to a cautious approach to stimulating the economy.
But while lower deposit rates may be good for the bank’s balance sheets, analysts said they won’t encourage more consumer spending — the one thing most economists agree is needed to help revive growth that has been falling for years and was hit especially hard by a downturn in China’s property sector.
“Banks are already passing on lower deposit rates to savers: which will do nothing to encourage spending in the current environment, and people will instead save even more to generate the same return they were earning before,” RaboResearch said in a commentary.
China’s economy expanded at a 4.7 percent annual rate in the last quarter, down from 5.3 percent in January-March.
Thursday’s moves coincided with a downturn in world stocks that extended losses in Chinese markets that have swooned this year while share prices soared in many other countries.
The flurry of rate cuts this week followed a major policy-setting meeting of the ruling Communist Party last week that laid out ambitious plans for reforms in many areas of the economy but did not spell out any specific plans for stimulus driven by government spending.
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