Central bank cuts interest rate
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E-mail China.org.cn, July 5, 2012
The central bank announced Thursday it would cut the benchmark interest rate for one-year deposits by 25 basis points beginning Friday.
The benchmark one-year lending rate will also be lowered by 31 basis points the same time, the People's Bank of China (PBOC) said in a statement on its website.
It was the second time that China's central bank cut the benchmark rates this year after a 25-basis-point cut in interest rates in June.
The surprise rate cuts have fuelled concerns that the slowdown in the world's second-largest economy is worse than predicted.
The PBOC also said in the statement that it will allow banks to offer 30 percent discount to borrowers, larger than the previous 20 percent, but the lower limit of the floating band of mortgage loan interests will remain unchanged.
After the latest cut, the one-year deposit interest rate will fall to 3 percent while that of the one-year loan interest rate will be lowered to 6 percent.
The upper limit of the floating band of deposit rates was previously adjusted to 1.1 times the benchmark.
Xu Jianping, president of Soochow Asset Management, said the central bank's move is based on falling inflation and gloomy data for the second quarter, which have yet to be released.
"The cut is aimed to stimulate the economy which is losing steam," he said.
China's economy is facing its most difficult moment in 30 years while GDP growth this year will be less than 8 percent, said Oliver Chiu, head of research and investment advisory in the wealth management unit of Citibank (China).
China's gross domestic product slowed to a nearly three-year low of 8.1 percent in the first quarter and key economic indicators for June continue to suggest downward risks.
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