SteelOrbis Shanghai
In a further loosening of its monetary policy, the People's Bank of China (central bank) has decided to cut the one-year benchmark interest rate by 0.27 of a percentage point, effective from December 23, 2008. Following the adjustment, the one-year deposit interest rate will fall to 2.25 percent and the benchmark interest rate for one-year loans will be lowered to 5.31 percent.
Also, as of December 25, 2008, the deposit reserve ratio of financial institutions in China will be adjusted down 0.5 of a percentage point to 14.5 percent.
This is the third time this year that China's central bank has decreased interest rates and the reserve ratio at the same time, and is also the fifth downward movement recorded in interest rates, and the fourth reduction of the deposit reserve ratio. This adjustment comes less than one month after the previous unprecedented reduction in both the interest rates and reserve ratio on November 27.
Economic experts have stated that the rate cuts this time are aimed at further stimulating the economy for the coming year. On the one hand, cutting interest rates will encourage more investment next year; on the other hand, it also constitutes a preparation for the government's plans for the massive issuing of bonds. Naturally, the continuous and rapid decline in CPI and PPI growth has also provided support for the rate adjustments.