China slashed interest rates today for the fourth time since mid-September, dramatically stepping up the pace of monetary easing to cushion the blow of global financial turmoil on the world's fourth-largest economy.
The People's Bank of China cut benchmark rates for one-year loans and deposits by 1.08 percentage points, lowering the cost of one-year borrowing to 5.58% and the rate on 12-month certificates of deposit to 2.52%.
The cut in the lending rate was the biggest since October 1997; that in the deposit rate was the biggest since June 1999.
The central bank also reduced the proportion of deposits that banks must hold in reserve, giving them more money to lend to businesses reeling from a drop in export demand and a downturn in the property market.
The cuts come on the heels of a 4 trillion yuan ($586 billion) stimulus package unveiled on November 9 designed to ramp up investment in short order in roads, railways, affordable housing and an array of public works.
Like other countries, China has watched its economy slow abruptly since the bankruptcy of Lehman Brothers in mid-September opened a new, dark chapter in the financial crisis, shaking confidence and prompting banks to cut credit lines.
Industrial growth slumped last month to a seven-year low; exports, imports, retail sales and fixed-asset investment all weakened, while power generation fell 4% from a year earlier, the first drop in a non-holiday month for a decade.
China changes rates in increments that are divisible by nine to make it easier for lenders, which work off a 360-day banking year, to calculate interest - a task that until recently was often done with an abacus.
The easing, which follows interest rate reductions on October 29, October 8 and September 15, was meant to ensure sufficient liquidity in the banking system to ensure growth, the central bank said on its website.
