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China makes 4th interest rate cut spur economic growth

The People’s Bank of China (PBOC), the country’s central bank, made its fourth interest cut since November 2014 to stimulate growth in slowing Chinese economy.

The PBOC also lowered the reserve requirement ratio (RRR) for banks lending to the farm sector and small and medium-sized enterprises by 50 basis points in an effort to spur lending and support increased economic activity.

The central bank lowered the one-year benchmark bank lending rate by 25 basis points to 4.85 percent, and reduced the one-year benchmark deposit rate by 25 basis points to 2 percent. Interest rates were previously cut May 10th and March 1st, 2015 and November 21st, 2014.

The RRR for all commercial banks was previously reduced by 100 basis points in April and 50 basis points in February with the aim of improving liquidity in the financial system. The most recent cut is more targeted at assisting small and medium businesses. 

Rate cuts come on the back of a slowing economy largely due to a cooling property market and excess factory capacity.

Chinese authorities have used a multi-pronged monetary easing approach this year, combining benchmark interest rate cuts with lower bank reserve ratios and liquidity injections into banks. 

According to a PBOC release, it will "continue to implement prudent monetary policy, use various policy tools to strengthen and improve marco-prudential management, optimize policy combinations and create neutral and appropriate monetary and financial environments for economic adjustments and upgrading."


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