In Six Months China Cuts Its Interest Rate for the Third Time
In the last six month's China cut its interest rates thrice once on November 22, second time on March 1 and again on May 10.
The Sunday's interest rate cut is seen as a desperate attempt to speed up the slow economic growth. The central bank announced the action is aimed at giving greater flexibility in setting the rates paid to depositors and is a new step to create a financial system which is more market-oriented.
The rate cut decision of the central bank mirrors the urgency of the communist leadership which needs to reverse the growing slump, which in turn threatens to give rise to new heights of unemployment which could be seen as a politically dangerous situation.
After the consequences of the financial global crisis of 2008, China is again facing a major slow down in its economy and its growth rate has slid to its lowest levels with exports dropping in April by 6.2 percent. Surveys conducted on manufacturers revealed that factory employment dropped to its weakest levels in April in one year.
On Sunday, the People's Bank of China cited "downward economic pressures" as the reason to cut the interest rate on a loan of one given by commercial banks to 5.10 percent or by 0.25 percentage point.
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