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China Cuts Key Interest Rates, Hoping to Kick-Start Flagging Economy
The reduction in the rates, which are used to set corporate loans and home mortgages, signaled concern that the country’s postpandemic rebound was stalling.
China’s central bank cut key interest rates on Tuesday for loans issued by the state-controlled banking system, in the clearest sign yet of mounting concern in the Chinese government and corporate sector that the country’s economy is stalling.
The interest rate cut was small — a tenth of a percentage point for the country’s benchmark one-year and five-year interest rates for loans. But because almost all of the country’s corporate lending and mortgages are linked to the two rates, the reductions could have some effect on the overall pace of economic growth.
The move by the central bank, the People’s Bank of China, puts China at odds with policies in the West. The Federal Reserve spent over a year battling inflation by raising rates before pausing this month. The European Central Bank has also been pushing up interest rates in response to inflation.
1.08 percentage points in a single day. And during the Asian financial crisis of the late 1990s, China cut loan rates 1.44 percentage points in one day.
Tuesday’s cut brought the benchmark one-year rate to 3.55 percent from 3.65 percent. Companies typically pay the benchmark rate plus one or more percentage points, with smaller companies and private-sector businesses paying more than big companies and state-owned enterprises.
The five-year rate, used as a benchmark for setting mortgage rates, was cut to 4.2 percent from 4.3 percent. Home buyers and homeowners often pay another percentage point above that level.
@KeithBradsher