China looks at stimulus with 25 bps rate cut
07 Jun 2012
China has eased interest rates, cutting borrowing costs for business and industry amidst concerns that the euro area's deepening debt crisis would dampen global economic prospects further.
The European Union is China's single biggest market and any decline in demand there would have serious repercussions on the Chinese economy.
The 25 basis points reduction brings down the official borrowing rate to 6.31 per cent and the deposit rate to 3.25 per cent.
The People's Bank of China (PBOC) expects the reduction in lending rates to aid domestic consumption growth and balance losses on the export front.
By keeping demand and production levels in the country, China expects to cushion the after-effects of a collapse of the euro zone economy.
By keeping domestic consumption and industrial activity more or less insulated, China could avert a glut in production and consequent job losses.
