2. Cutting interest rates
The cost of borrowing in China has been cut aggressively since the autumn of 2014 in response to the slowdown in the economy and the distress caused to property owners, local government and corporations by high debt-servicing costs. Tight monetary policy was one mechanism by which Beijing sought to slow the pace of growth amid concerns that its response to the global financial crash – cheaper credit and a fiscal boost worth 12% of GDP – had been excessive. The subsequent cut in benchmark interest rates from 6% to a record low of 4.85% suggests policymakers think the slowdown has been too rapid.
