Beijing cuts rates to stimulate economy

Beijing. China’s central bank announced new measures yesterday to boost the economy, by cutting several interest rates, including the reference rate and mortgage rates, as well as reducing the amount of deposits that banks must hold as reserves.

It is the biggest stimulus plan since the pandemic to lift the world’s second-largest economy out of its deflationary rut, following a series of weaker-than-expected economic data that puts the country at risk of missing its growth target for this year.

Nearly two years after the lifting of restrictive anti-Covid measures, the Chinese economy has yet to take off, despite the steps taken by the authorities to relaunch activity. The post-pandemic recovery was shorter and less robust than expected, weighed down by a real estate crisis, weak consumption and high unemployment.

Governor Pan Gongsheng told a news conference alongside officials from two other financial regulatory agencies that the central bank will cut by 0.5 percentage points the amount of cash banks must hold as reserves, known as the reserve requirement ratio.

The People’s Bank of China will also cut the seven-day double-dealing rate by 0.2 percentage points to 1.5 percent and lower deposit rates and other interest rates.

Interest rates on existing mortgages will also be cut by an average of 0.5 percentage points, Pan said, a move that could provide some relief for households but could raise concerns about banks’ profitability.