Date
19 November 2017
Shrinking manufacturing activity is prompting Chinese authorities to step up monetary easing. Photo: Bloomberg
Shrinking manufacturing activity is prompting Chinese authorities to step up monetary easing. Photo: Bloomberg

China cuts interest rates for 2nd time in three months

China cut benchmark interest rates for the second time in three months, in a fresh sign that authorities are becoming increasingly concerned about flagging growth and deflation risks.

The People’s Bank of China (PBoC) announced on Saturday a quarter percentage point cut in both the one-year loan rate and the one-year deposit rate, to 5.35 percent and 2.5 percent respectively.

The cut, which took effect Sunday, came ahead of February data that showed a second consecutive month of shrinking manufacturing activity in the nation.

In a statement accompanying the announcement, the PBoC pointed to rising deflationary pressure as a trigger for rate reduction, noting that plunging global commodity prices provided room to spur growth by lowering interest rates, the Wall Street Journal reported.

The latest easing step followed a rate cut in November, which marked the first such move in two years, and a lowering of the bank reserve ratio requirement.

China’s economic growth slipped to 7.4 percent last year, its slowest pace in nearly a quarter century, promoting Beijing to look at big-bang measures to shore up the manufacturing and other sectors. 

“Deflationary risk and the property market slowdown are two main reasons for the rate cut this time,” the Journal quoted a central bank official as saying in an interview.

Top leaders will gather in Beijing soon for an annual parliament session, during which the government is expected to introduce broad policy goals for the year.

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