China cuts interest rates, allows freer fluctuation

 BEIJING, June 7 (Xinhua) -- China announced Thursday its first cut in benchmark interest rates in more than three years after slower-than-expected growth in the world's second-largest economy raised concerns of a hard landing.

The People's Bank of China (PBOC), the central bank, said Thursday it would cut the benchmark interest rate for deposits and loans by 25 basis points beginning Friday.

After the cut, the one-year deposit interest rate will fall to 3.25 percent while the loan interest rate will be lowered to 6.31 percent.

It marks the first time for China to cut the benchmark rates since December 2008, after which it has raised the rates five times to drain liquidity¹.

"Given China's current economic situation and its policy shift towards maintaining growth, the cut is well within expectations," said Zhang Liqun, researcher from the Development Research Center of the State Council, or China's cabinet.

The latest move came as China's GDP growth slowed to a nearly three-year low of 8.1 percent in the first quarter and key economic indicators³ for April continued to suggest downward risks, prompting the government to shift focus from inflation control to securing growth.

China's inflation rate slowed to 3.4 percent in April from 3.6 percent in March and was widely expected to ease further in May due to falling food prices and the base effect.

In a State Council meeting last month, Premier⁴ Wen Jiabao said the government should "place maintaining growth in a more important position and carry out preemptive policy adjustments and fine-tuning more forcefully according to the changing situation."

It also came as new yuan-denominated loans in April ran at the lowest level this year and manufacturing activities continued to stagnate⁵ in May.

Guo Tianyong, a professor from the Central University of Finance and Economics, said the rate reduction will play a significant role in stabilizing⁶ growth as it will lower operation costs for businesses and stimulate⁷ credit demands.

Dragged down by sluggish⁸ demand, China's new yuan-denominated loans in April totaled 681.8 billion yuan (107.9 billion U.S. dollars), far below market estimates of around 800 billion yuan and was also the lowest this year.

Tang Yunfei, chief macroeconomic analyst⁹ at Founder¹⁰ Securities, saw the cut as a signal of a new round of monetary¹¹ loosening and he expected an acceleration¹² in credit supply for the latter half of the year.

"Credit supply for the whole year will exceed 8.5 trillion yuan," he predicted.

With major global economies mired¹³ in recessions, Gao Shuguang, an economist¹⁴ with the Development Research Center under the State Council, said China's gradually loosening policy, including three cuts in bank reserve requirement ratio (RRR) so far, is in line with international practices.

"Stabilizing growth has become the focus for many countries, and our latest move was in line with the international trend," he said.

Lifted by the move, U.S. stocks surged at opening time Thursday, with the Dow Jones industrial average up 1.3 percent to 12,543.

Accompanying the reduction in borrowing costs that will have an immediate¹⁵ impact in stimulating¹⁶ the economy, the real surprise on Thursday was the central bank's decision to allow banks more freedom in setting the deposits and interest rates, a significant step towards the liberalization of the interest rates, analysts¹⁷ said.

The PBOC said the upper limit of the floating band of deposit rates will be adjusted to 1.1 times the benchmark while banks are allowed to offer a 20 percent discount to borrowers.

China's commercial banks until now were generally not allowed to offer deposits rates higher than the set benchmark and the downward float for loan profits were controlled within 90 percent of the benchmark.

"The move is of great significance as it means a big step forward in the reforms of the interest rate mechanism," said Xia Bin², counselor¹⁸ of the State Council and former member of the monetary policy committee of the People's Bank of China.

The somewhat sudden adjustment echoed promises made by PBOC earlier this year to push forward market-oriented interest rates.

Ba said the new policy will test banks' price-setting and innovation abilities, which allowed competitive banks to create diversified¹⁹ products to attract loans.

Meanwhile, the adjusted floating band will benefit businesses with lower financing costs, stimulate credit demand, and foster an amiable²⁰ environment for the country to spur growth through fiscal²¹ means.

Although the cuts to the reserve requirement ratio and interest rates, which analysts believe will happen again times this year, are aimed at stimulating credit supply and demand, respectively, the realization²² of a balance between the two will need additional efforts from the government, including the assistance of fiscal policies, analysts said.

"Especially in terms of economic restructuring and easing business burdens, fiscal policies have a larger role to play," said Cai Yanfei, an analyst with Industrial Securities.

1 liquidity   

n.流动性，偿债能力，流动资产

参考例句：

• The bank has progressively increased its liquidity.银行逐渐地增加其流动资产。
• The demand for and the supply of credit is closely linked to changes in liquidity.信用的供求和流动资金的变化有密切关系。

2 bin   

n.箱柜；vt.放入箱内；[计算机] DOS文件名:二进制目标文件

参考例句：

• He emptied several bags of rice into a bin.他把几袋米倒进大箱里。
• He threw the empty bottles in the bin.他把空瓶子扔进垃圾箱。

3 indicators   

（仪器上显示温度、压力、耗油量等的）指针( indicator的名词复数 )； 指示物； （车辆上的）转弯指示灯； 指示信号

参考例句：

• The economic indicators are better than expected. 经济指标比预期的好。
• It is still difficult to develop indicators for many concepts used in social science. 为社会科学领域的许多概念确立一个指标仍然很难。

4 premier   

adj.首要的；n.总理，首相

参考例句：

• The Irish Premier is paying an official visit to Britain.爱尔兰总理正在对英国进行正式访问。
• He requested that the premier grant him an internview.他要求那位总理接见他一次。

5 stagnate   

v.停止

参考例句：

• Where the masses are not roused,work will stagnate.哪里不发动群众，哪里的工作就死气沉沉。
• Taiwan's economy is likely to stagnate for a long time to come.台湾经济很可能会停滞很长一段时间。

6 stabilizing   

n.稳定化处理[退火]v.（使）稳定， （使）稳固( stabilize的现在分词 )

参考例句：

• The disulfide bridges might then be viewed primarily as stabilizing components. 二硫桥可以被看作是初级的稳定因素。 来自辞典例句
• These stabilizing design changes are usually not desirable for steady-state operation. 这些增加稳定性的设计改变通常不太符合稳态工作的要求。 来自辞典例句

7 stimulate   

vt.刺激，使兴奋；激励，使…振奋

参考例句：

• Your encouragement will stimulate me to further efforts.你的鼓励会激发我进一步努力。
• Success will stimulate the people for fresh efforts.成功能鼓舞人们去作新的努力。

8 sluggish   

adj.懒惰的，迟钝的，无精打采的

参考例句：

• This humid heat makes you feel rather sluggish.这种湿热的天气使人感到懒洋洋的。
• Circulation is much more sluggish in the feet than in the hands.脚部的循环比手部的循环缓慢得多。

9 analyst   

n.分析家，化验员；心理分析学家

参考例句：

• What can you contribute to the position of a market analyst?你有什么技能可有助于市场分析员的职务？
• The analyst is required to interpolate values between standards.分析人员需要在这些标准中插入一些值。

10 Founder   

n.创始者，缔造者

参考例句：

• He was extolled as the founder of their Florentine school.他被称颂为佛罗伦萨画派的鼻祖。
• According to the old tradition,Romulus was the founder of Rome.按照古老的传说，罗穆卢斯是古罗马的建国者。

11 monetary   

adj.货币的，钱的；通货的；金融的；财政的

参考例句：

• The monetary system of some countries used to be based on gold.过去有些国家的货币制度是金本位制的。
• Education in the wilderness is not a matter of monetary means.荒凉地区的教育不是钱财问题。

12 acceleration   

n.加速，加速度

参考例句：

• All spacemen must be able to bear acceleration.所有太空人都应能承受加速度。
• He has also called for an acceleration of political reforms.他同时呼吁加快政治改革的步伐。

13 mired   

abbr.microreciprocal degree 迈尔德（色温单位）v.深陷( mire的过去式和过去分词 )

参考例句：

• The country was mired in recession. 这个国家陷入了经济衰退的困境。
• The most brilliant leadership can be mired in detail. 最有才干的领导也会陷于拘泥琐事的困境中。 来自《现代汉英综合大词典》

14 economist   

n.经济学家，经济专家，节俭的人

参考例句：

• He cast a professional economist's eyes on the problem.他以经济学行家的眼光审视这个问题。
• He's an economist who thinks he knows all the answers.他是个经济学家，自以为什么都懂。

15 immediate   

adj.立即的；直接的，最接近的；紧靠的

参考例句：

• His immediate neighbours felt it their duty to call.他的近邻认为他们有责任去拜访。
• We declared ourselves for the immediate convocation of the meeting.我们主张立即召开这个会议。

16 stimulating   

adj.有启发性的，能激发人思考的

参考例句：

• shower gel containing plant extracts that have a stimulating effect on the skin 含有对皮肤有益的植物精华的沐浴凝胶
• This is a drug for stimulating nerves. 这是一种兴奋剂。

17 analysts   

分析家，化验员( analyst的名词复数 )

参考例句：

• City analysts forecast huge profits this year. 伦敦金融分析家预测今年的利润非常丰厚。
• I was impressed by the high calibre of the researchers and analysts. 研究人员和分析人员的高素质给我留下了深刻印象。

18 counselor   

n.顾问，法律顾问

参考例句：

• The counselor gave us some disinterested advice.顾问给了我们一些无私的忠告。
• Chinese commercial counselor's office in foreign countries.中国驻国外商务参赞处。

19 diversified   

adj.多样化的，多种经营的v.使多样化，多样化( diversify的过去式和过去分词 )；进入新的商业领域

参考例句：

• The college biology department has diversified by adding new courses in biotechnology. 该学院生物系通过增加生物技术方面的新课程而变得多样化。 来自《简明英汉词典》
• Take grain as the key link, develop a diversified economy and ensure an all-round development. 以粮为纲，多种经营，全面发展。 来自《现代汉英综合大词典》

20 amiable   

adj.和蔼可亲的，友善的，亲切的

参考例句：

• She was a very kind and amiable old woman.她是个善良和气的老太太。
• We have a very amiable companionship.我们之间存在一种友好的关系。

21 fiscal   

adj.财政的，会计的，国库的，国库岁入的

参考例句：

• The increase of taxation is an important fiscal policy.增税是一项重要的财政政策。
• The government has two basic strategies of fiscal policy available.政府有两个可行的财政政策基本战略。

22 realization   

n.实现；认识到，深刻了解

参考例句：

• We shall gladly lend every effort in our power toward its realization.我们将乐意为它的实现而竭尽全力。
• He came to the realization that he would never make a good teacher.他逐渐认识到自己永远不会成为好老师。