China cuts interest rates in new bid to spur economy

In addition, the PBOC is reducing the reserve requirements (RRR) for most big banks from 18.5 percent to 18.0 percent.

The People’s Bank of China has cut its main interest rate by 0.25 percentage points to 4.6 per cent in an attempt to boost its economy after days of market turmoil.

Chinese stock markets closed down 7% on Tuesday after falling almost 8% in Monday’s trade.

“Frankly this shows a bit of panic in my mind”, resident economist at Beijing’s Conference Board, Andrew Polk, said.

The economy still faces downward pressure and the task of stabilizing growth, adjusting its structure, pushing reforms and improving living standards is very challenging, the PBOC said in a Q&A-style statement released after the move.

China’s domestic market, meanwhile, has now suffered two days of drastic declines.

One-year benchmark deposit rates were also reduced by 25 basis points, while the ceiling for deposit rates with tenures of over a year was scrapped to further free up China’s interest rate market. The central bank also lowered the reserve requirement ratio (RRR) – which governs how much money banks can lend – by 0.5 percent, according to media reports. However, the rate cuts and the effective increase in money supply may only serve to store up further problems giving existing concerns about a potential debt bubble in China.

China’s central bank has cut one of its key interest rates following a tumultuous day for global markets.

For one thing, China’s troubles raise doubts about whether its policymakers have the tools to keep their economy growing at a healthy pace – something that’s been a reassuring constant for more than two decades.

It is these investors who are New Zealand’s export targets, and Tony Alexander said the dramatic moves in the Chinese share market could hurt consumer confidence.

It appears the world markets have received the message from the PBOC and they like it. In midday trading in New York, the Dow Jones Industrial Average was up 2.3% to 16,242 and the S&P 500 Index climbed 2.4% to 1,938.

‘The weakness in emerging markets is now spreading to developed market outlook, questioning the scope of potential base rate liftoff over the coming months in the U.S. and the UK, ‘ analysts at RBC Capital wrote in a note. After all, the June rate cut did little to stall the crash and in the past month or so China has tried everything from pumping in billions of dollars to stimulate the markets, putting curbs on selling stocks and devaluing the yuan. That included loans to a state-owned company that was charged with propping up the sinking stock market by purchasing shares.