China Cuts Interest Rates to Boost Economy

Beijing leaders have cut key lending rates to attack China's economic problems. In a society where consumers aren't debt-heavy, will it help?

As they try to tackle China's economic problems, Beijing leaders are not taking any half measures. Earlier this month the government unveiled a massive $586 billion dollar fiscal package of tax cuts and spending projects. Now in a further attempt to goose growth, China's central bank on Nov. 26 announced a massive cut in its one-year benchmark lending rate, slashing it over a full percentage point, to 5.58%. The 108-basis-point cut is the most dramatic the Peoples Bank of China has engineered since the dark days of the Asian financial crisis in 1997. The central bank also cut the reserve rate requirement that banks must set aside against loans and reduced one-year bank deposit rates by 108 basis points, to 2.52%.

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