China slashes key lending, deposit rates to boost liquidity
26 Nov 2008
China's central bank today cut its key interest rates, for the fourth time in three months, in a bid to infuse more liquidity into the system and cushion the blow of the global financial crisis.
The People's Bank of China (PBOC) cut the benchmark rates for one-year loans and deposits by 1.08 percentage points each, bringing the cost of borrowing to 5.58 per cent and the return on deposits to 2.52 per cent, respectively.
The central bank also reduced the proportion of deposits that banks must hold in reserve, giving them more money to lend.
The ratio of reserves for big banks will be reduced by one percentage point, while that for smaller banks will be cut by 2 percentage points, effective 5 December, PBOC said.
For the nation's five biggest banks, this will mean a reduction in their reserve deposits with the PBOC from 17 per cent to 16 per cent and for the smaller ones, from 16 per cent to 14 per cent.
The PBOC also cut the one-year relending rate by 108 basis points and the interest rate payable on required reserves and excess reserves by 27 basis points.
The new rates will be effective Thursday, the central bank said in a website release.
The cut in the lending rate, the the biggest since October, comes close on the heels of a 4 trillion yuan ($586 billion) infrastructure stimulus package unveiled by the Chinese government on 9 November.
China, like other countries, in the region and elsewhere, has seen a dramatic slowdown of its economy ever since the financial crisis started unfolding.
China saw its industrial growth slump last month to seven-year lows, even as its exports, retail sales and capital formation weakened and power generation fell 4 per cent from a year earlier.
