China cuts interest rates to boost economy in wake of global stock crash

China is to cut core interest rates from tomorrow in a renewed bid to stimulate its slowing economy and help arrest a sell-off of Chinese stocks. It is the fifth time in nine months that the People’s Bank of China (PBoC) - the country’s central bank - has slashed borrowing costs. The move follows a crash in values on domestic Chinese stock markets. The collapse in investor confidence spilled over onto world stock indices, resulting in two days of sharp selling, though values in Europe have recovered well on Tuesday .

Frankly this shows a bit of panic in my mind. This is a big-bang move. It’s meant to address some real issues and also prevailing market sentiment over the past two days.

Andrew Polk, economist at the Conference Board in Beijing

That rally was extended in Europe when news of the PBoC’s intervention broke and US stocks also followed suit. Bond yields and oil prices also rallied on the intervention. The central bank said the benchmark rate for a one-year loan would be cut by 0.25 percentage points to 4.6% and the one-year rate for deposits would fall by a similar margin to 1.75%. It also increased the amount of money available for lending by reducing the minimum reserves banks are required to hold by 0.5%.

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