China Cuts Rates to Halt a Slide in its Economy
2015/5/19 16:55:35 Source：The New York Times
SHANGHAI — Hoping to shore up a weakening economy, China said on Sunday that it would cut benchmark interest rates for the third time in five months.
The nation’s central bank said in its announcement that the one-year lending rate would be reduced by 25 basis points, or a quarter percentage point, to 5.1 percent, and that the one-year deposit rate was also being cut 25 basis points, to 2.25 percent.
The announcement came after the government announced weaker-than-expected trade figures on Friday, with exports dropping 6.2 percent in April from a year earlier, and with continuing signs of weakness in other parts of the economy. On Saturday, the government reported tepid consumer inflation, which ran at a rate of 1.5 percent in April compared with the same month last year.
By reducing interest rates, the government hopes to spur lending to businesses and create more momentum in the world’s second-largest economy after the United States.
Although China is still growing faster than any other major economy, the slowdown has accelerated in recent months.
China reported last month, for instance, that its economy grew just 7 percent in the first quarter of this year, one of the lowest rates in a decade and far below the double-digit growth the country had become accustomed to over the past few decades.
This year, the government has targeted growth to come in at about 7 percent, but policy makers are concerned that the pace is trending downward too rapidly and that growth much lower than 7 percent could create huge disruptions in the economy.
While China’s stock market has suddenly come to life, the property market has been weak, exports have fallen and there are worries about the massive debt that has built up over the past decade, particularly from local government borrowings for infrastructure.
The authorities have said they are comfortable with a lower, more sustainable rate of growth and have pushed to restructure the economy in favor of more consumption and away from state-owned companies. And as part of that strategy, some officials have insisted that the government will not fund a stimulus package, the way it did in late 2008 and 2009, after the onset of the global financial crisis.
Many economists are gloomy about China’s prospects in the coming years, but not all. Nicholas Lardy, a China specialist at the Peterson Institute for International Economics in Washington, said that while indicators like electricity generation, rail freight car loadings and industrial production had slowed, growth in the service sector had at least partially offset difficulties in manufacturing and in investment-led sectors like construction.
“The traditional relationship between electric power generation and G.D.P. growth has changed,” he said in an interview in Washington in late April, referring to gross domestic product.
Fred Hu, a Hong Kong economist and financier with broad connections in the Chinese government, also contends that the Chinese economy’s weaknesses are sometimes exaggerated, and that growth might not slip much below the government’s target of about 7 percent. “It may fluctuate, but 7 percent is about the right number,” he said.
But an ever-growing body of downbeat economic statistics has prompted other economists to worry that Chinese policy makers now face an unappetizing choice. They can continue to cut interest rates and bank reserve requirements in a bid to stimulate bank lending and keep the economy growing fairly strongly. But that extra lending would only expand further a debt load, particularly at local governments and state-owned enterprises, that has been surging as a share of economic output ever since the global financial crisis in 2008 and 2009.
