The Peoples Bank of China cut its policy interest rates for the sixth time since November in another attempt to jump start a slowing economy. The PBoC said it was lowering the one year benchmark bank lending rate by 25 basis points to 4.35 percent effective from Oct. 24. The one year benchmark deposit rate was also lowered by 25 basis points to 1.50 percent. The moves come just days before the China's fifth plenum from October 26 to October 29 where leaders will announce a draft of their 13th Five Year Plan, a sprawling blueprint that sets the direction for China's economic and social development.
The PBoC also said it would also lower its reserve-requirement ratio for banks by 0.5 percentage point, effective Saturday, in a bid to boost liquidity and maintain stable credit growth. The official reserve requirement ratio for most large banks will fall to 17.5 percent after the cut takes effect.
China has pursued its most aggressive policy easing cycle this year since the 2008/09 global financial crisis, as policymakers seek to invigorate an economy beset by weak demand and excessive industrial capacity.
Earlier in the week, China announced that its third quarter growth slowed to 6.9 percent from a year ago after growing 7.0 percent in the second quarter. Inflation weakness was evident in the September reading of consumer prices. The CPI increased 1.6 percent on the year after rising 2.0 percent in August. At the same time, producer prices deflated for a 43rd consecutive month, reflecting excess supply of housing materials and raw materials and overcapacity in heavy industry. The PPI sank 5.9 percent from a year ago for a second month.
The Peoples Bank of China (PBoC) is mainland China's central bank with the power to control monetary policy and regulate financial institutions.
The PBoC sets interest rates for mainland China. Interest rates are always divisible by nine, instead of by 25 as in the rest of the world. The renminbi or yuan is the official currency of the Bank and is legal tender in mainland China, but not in Hong Kong and Macau.
The Bank goes back in various forms to 1948. In the 1980s, as part of economic reform, the commercial banking functions of the PBoC were split off into four independent but state-owned banks. In 1983, the State Council promulgated said that the PBC would function as the central bank of China.
Its central bank status was legally confirmed on March 18, 1995 by the 3rd Plenum of the 8th National People's Congress. In 1998, the PBC underwent a major restructuring. All provincial and local branches were abolished, and the PBC opened nine regional branches, whose boundaries did not correspond to local administrative boundaries. In 2003, the Standing Committee of the Tenth National People's Congress approved an amendment law for strengthening the role of PBC in the making and implementation of monetary policy for safeguarding the overall financial stability and provision of financial services. The current governor is Zhou Xiaochuan.