What is China doing to boost its slumping economy?
As growth slides to 30-year low central bank embarks on series of corrective steps
China has cut its lending rates as the country grapples with a slumping economy and protracted trade war with the US.
On Wednesday, the People’s Bank of China cut its one-year loan prime rate (LPR) and five-year LPR by five basis points from 4.20% to 4.15% and from 4.85% to 4.8% respectively.
Reuters says the move was “widely expected”, but with growth sliding to near 30-year lows and a partial trade deal with the United States proving elusive, China has been forced to “slowly pick up its tempo of policy easing in recent weeks, with authorities pushing banks to keep supporting cash-strapped small- and medium-sized businesses”.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
On Monday, the central bank made a surprise reduction in another key short-term rate, the seven-day reverse repurchase rate, the first in more than four years, according to Refinitiv.
A day later, central bank governor Yi Gang said Beijing would step up credit support and lower real lending rates.
–––––––––––––––––––––––––––––––For a round-up of the most important business stories and tips for the week’s best shares - try The Week magazine. Start your trial subscription today –––––––––––––––––––––––––––––––
The series of rate cuts are a “reassuring sentiment signal” that the Chinese central bank is still willing to step up credit support for businesses despite a real estate bubble and rising debt levels, Stephen Innes, chief Asia market strategist at AxiTrader, told CNN.
The global debt load has surged by $78trn since 2008, and China alone has accounted for 40% of the increase, according to a recent report by the Institute of International Finance (IIF).
But rather than introduce large-scale policy measures to counter an ongoing economic slowdown, Beijing “has instead taken a series of small steps to fine-tune policy, indicating it believes growth could bottom out next year”, says the South China Morning Post.
It adds that “while many economists still expect Chinese growth to continue slowing next year, some now believe that if a trade war truce can be agreed with the United States, then growth could stabilise around 6% next year and even rebound slightly”.
CNN says “the central bank faces a balancing act, however, with China’s consumer inflation on the rise. Lower interest rates tend to increase inflationary pressures, as they make borrowing cheaper and cause people to spend more”.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
-
Band Aid 40: time to change the tune?
In the Spotlight Band Aid's massively popular 1984 hit raised around £8m for famine relief in Ethiopia and the charity has generated over £140m in total
By Rebekah Evans, The Week UK Published
-
Starmer vs the farmers: who will win?
Today's Big Question As farmers and rural groups descend on Westminster to protest at tax changes, parallels have been drawn with the miners' strike 40 years ago
By The Week UK Published
-
How secure are royal palaces?
The Explainer Royal family's safety is back in the spotlight after the latest security breach at Windsor
By Chas Newkey-Burden, The Week UK Published
-
Has the Taliban banned women from speaking?
Today's Big Question 'Rambling' message about 'bizarre' restriction joins series of recent decrees that amount to silencing of Afghanistan's women
By Harriet Marsden, The Week UK Published
-
Cuba's energy crisis
The Explainer Already beset by a host of issues, the island nation is struggling with nationwide blackouts
By Rebekah Evans, The Week UK Published
-
Putin's fixation with shamans
Under the Radar Secretive Russian leader, said to be fascinated with occult and pagan rituals, allegedly asked for blessing over nuclear weapons
By Harriet Marsden, The Week UK Published
-
Chimpanzees are dying of human diseases
Under the radar Great apes are vulnerable to human pathogens thanks to genetic similarity, increased contact and no immunity
By Harriet Marsden, The Week UK Published
-
Deaths of Jesse Baird and Luke Davies hang over Sydney's Mardi Gras
The Explainer Police officer, the former partner of TV presenter victim, charged with two counts of murder after turning himself in
By Austin Chen, The Week UK Published
-
Quiz of The Week: 24 February - 1 March
Puzzles and Quizzes Have you been paying attention to The Week's news?
By Sorcha Bradley, The Week UK Published
-
Will mounting discontent affect Iran election?
Today's Big Question Low turnout is expected in poll seen as crucial test for Tehran's leadership
By Sorcha Bradley, The Week UK Published
-
Sweden clears final NATO hurdle with Hungary vote
Speed Read Hungary's parliament overwhelmingly approved Sweden's accession to NATO
By Peter Weber, The Week US Published