China cuts key interest rates to try to boost growth

[Major Shaitan Singh]

China has cut its key interest rates for the first time since 2008, in an attempt to boost its slowing growth.

The benchmark one-year loan rate was cut by a quarter of one percent to 6.31%.

The People's Bank of China also cut deposit rates from 3.5% to 3.25%.

Earlier, China, which is growing at its slowest rate for three years, delayed the implementation of tougher bank capital rules amid concerns that they may hurt lending.
The rules, delayed until January next year, will increase the minimum cushion of capital a bank must keep to absorb losses on their loans.
There were fears that such a move may curb lending at a time when Beijing has been trying to boost growth amid a slowdown in its economy.
China had planned to introduce the rules at the start of this year.
The banks will be given a reasonable transition period to meet the new capital requirements "to help maintain appropriate credit growth", China's cabinet said in statement on its website late on Wednesday.

What are the Brics economies and how important are they?

'Effectively serve'

China has used lending as a key tool to spur growth in its economy in recent years. As it faces a slowdown in its economy, Beijing has been trying to boost lending again in a bid to boost demand and sustain growth.

China's economy grew at an annual rate of 8.1% in the first three months of the year, the slowest pace in almost three years.

There are fears that growth may slow even further, not least due to ongoing economic problems in its key export markets such as the US and eurozone.

Those concerns have seen China reduce the amount of money banks need to hold in reserve three times in the past few months in an attempt to give more cash to banks to lend to consumers.

On Wednesday, it introduced fresh measures to try and boost lending to small and medium-sized companies, which are one of the biggest contributors to growth.

The cabinet said it would lower the risk weighting assigned to loans given to such companies when calculating the cushion of capital a bank must keep.

It said the move was designed to "expand the small micro-enterprises and personal loans to more effectively serve the real economy".

http://www.bbc.co.uk/news/business-18349596

 

[Chinese-Dragon]

Good idea.

Now that inflation has been brought under control, growth-boosting measures seem appropriate.

 

[MightyDragon]

Normal operation...
Both growth rate and inflation are reduced, so lower interest rate to boost growth...
It also helps to lower the excessive high exchange ratio of YMB due to Euro crisis!