Source: China Daily

11-27-2008 08:56

The People's Bank of China, the country's central bank, decided to reduce the interest rates by a massive 1.08 per cent from Thursday, in a desperate effort to jumpstart capital investments, boost housing sale and propel domestic consumption, amid an increasing chilly economic winter of the world.

A woman walks in front of the headquarters of China's central bank, the People's Bank of China, in Beijing in  this file photo dated October 8, 2008. The central bank  decided to reduce the interest rate by a massive 1.08 per  cent from Thursday, in a desperate effort to jumpstart  capital investments, boost housing sale and propel domestic  consumption, amid an increasing chilly economic winter  of the world.[Agencies]

The 108 basic points reduction, announced by the official website of the central bank, is unseen in the past 10 years. Previously, the bank has resorted to piecemeal rate hike or reduction of only 27 basic points to finetune the economy.

In the meantime, the bank said that the deposit reserve ratio, by which a commercial bank is required to deposit a portion of its collected savings in the central bank, will be cut by 1 percent to 16 percent.The measure, effective on December 5, will increase cash supply on the money market.

The latest drastic slashing of interest rates, coupled with the massive 4-trillion yuan (US$586 billion) fiscal stimulus package announced by China's State Council, the cabinet, earlier this month, is to weigh heavily on the worldwide collective efforts in blocking a rapid slowdown of the global economy, analysts said. It might buttress investors' confidence on the stock markets.