China cuts benchmark interest rates by 0.27 pct

(Xinhua/chinadaily.com.cn)
Updated: 2008-10-29 19:35

BEIJING -- China's central bank cut banks' benchmark lending and deposit rates by 0.27 percentage point on Wednesday, the third cut in six weeks, to prop up consumption and bolster the growth of its economy on the face of worsening global economic slowdown.

The benchmark one-year deposit rate would drop to 3.60 percent from 3.87 percent, while the benchmark one-year lending rate would fall from 6.93 percent to 6.66 percent,the People's Bank of China said on its website (www. pbc.gov.cn).

The move would become effective on October 30.

Analysts say the move is aimed to reduce borrowing costs of enterprises, propell domestic investment, and it will also be conducive for theequitymarket.

"The move came as the risk a further slowdown looms larger," said Zhang Xiaojing, an economist with the Chinese Academy of Social Sciences. "The policymakers are now prepared to bring out whatever necessary to stabilize growth."

The Chinese economy has been slowing down over the year due to weaker overseas demand and a slump of the real estate sector. The nation's GDP growth decelerated for 9 percent in the third quarter, the first time in single digit in five years.

The central bank also cut interest rates and reserve requirements on September 15 and October 8. The latter move coincided with rate cuts by leading central banks around the world.

The move came amid rate cuts by worldwide central banks to stimulate the slacking economy. The US Federal Reserve and Japan's central bank are also expected to cut rates later to reduce the impact of the world financial crisis on the economies.

The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability, experts say.

China's stock market dropped more than 66 percent from its peak last October, while real estate prices continue to fall in recent months.

China's benchmark Shanghai Composite Index closed at 1,719.81 points on Wednesday, down 52 points, or 2.94 percent. The Index climbed 2.8 percent to close at 1,771.82 the previous day.

Last week, China announced an array of policies, including tax exemption and mortgage deposits reduction, to boost the falling real estate sector amid the global economic slowdown.