China’s central bank cut its benchmark lending rate by 25 basis points to 5.1 percent on Sunday, its third reduction since November, as economic growth cools to levels not seen since the global financial crisis.
The People’s Bank of China (PBOC) also reduced one-year benchmark deposit rates by 25 basis points to 2.25 percent, it said in a statement on its website, adding that the reductions would be effective on May 11.
The central bank said the move would support the healthy development of the economy. Economists had said it was not a matter of if, but when China eased policy again after economic growth in the first quarter cooled to 7 percent, the slowest pace since 2009.
Initial indicators and industry surveys for April released over the last few weeks had pointed to a further loss of momentum heading into the second quarter. “Currently, the pace of domestic economic restructuring is quickening and the fluctuation of external demand is relatively big. China’s economy is still facing relatively big downward pressure,” the central bank said.
Liquidity in the banking system is generally adequate and market interest rates are falling, providing a good window to open up the upper limit for deposit rates, it said. The central bank has now cut interest rates and relaxed banks’ reserve requirements five times in six months, and many economists expect more easing measures over the course of the year as the world’s second-largest economy is weighed down by a weak property market and slackening growth in manufacturing and investment.
It is simple to see that the growth model powering China’s economy is running out of steam as the world’s second-largest economy is too reliant on exports and municipal debt to build infrastructure. And rebooting China’s economy is easier said than done, he said.
China had a set of policies that served them very well for a long time. Anyone who says they’ve developed a better form of capitalism I think is wrong. There’s a bigger risk in overestimating China’s strength as it is in underestimating it.
China’s economy grew at its slowest pace since 2009, building the case for further stimulus from policymakers. The government said Wednesday that gross domestic product expanded 7 percent in the three months to March. When I look at the growth, I would much rather, and I know they would much rather, grow at a slower rate but have the right sources for growth.
Those right sources of growth for China are opening up markets and having the private sector do more to stimulate the economy.