BEIJING (AP) – For the third time in six months, China’s central bank is cutting interest rates to spur the country’s sluggish economy by giving state-owned financial institutes more flexibility in setting rates.
Citing “downward economic pressures,” the People’s Bank of China said Sunday that it would cut the rate on a one-year loan by commercial banks by 0.25 percentage point to 5.10 percent. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.25 percent.
The rate cut reflects the Communist leadership’s growing urgency about reversing a deepening slump that threatens to cause a politically dangerous spike in unemployment.
Growth for the world’s second-largest economy fell to 7.4 percent last year – the lowest level in more than two decades. Beijing this year has lowered the target for economic growth to 7 percent.
Trade also shrank by 6 percent in the first quarter. The country’s imports and exports contracted again in April in a new sign of economic weakness.
Interest rates were also cut on Nov. 22 and then again on March 1. The new rates take effect Monday.
The cuts are expected to reduce financial costs for state companies and are a signal to state-owned banks to boost lending.