China's central bank has cut both interest rates and the reserve-requirement ratio, as nerves start to jangle about the state of the economy faced by a deepening global financial crisis.
Bank deposit and lending rates will be cut by 0.27 percentage points
from Thursday, and the reserve-requirement ratio for banks will be cut
by 0.5 percentage points from 15 October, the People's Bank of China
said. The move follows a coordinated series of cuts by major central
banks worldwide.
"This was mainly out of concerns over an economic slowdown," said Ba
Shusong, Deputy Chief of the Finance Research Institute at the
Development Research Center of the State Council.
This second monetary policy shift in less than a month highlights the
government's rising concerns over the slowing economy and slumping
capital market.
In a separate move, the State Council announced the scrapping of a five
per cent individual income tax on savings interest. The move, aimed at
shoring up weakening consumer sentiment, comes into effect on Thursday.
China began levying a 20 per cent individual income tax rate on
interest in 1999, but cut the rate to five per cent in August 2007.
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