PHOTO: The People's Bank of China says it will be lowering its one-year bank lending rate by 25 basis points to 4.6 per cent.
China's central bank has cut its benchmark interest rates and the amount of cash banks must keep on hand in a bid to boost the world's second-largest economy as it battles a collapse in share prices.
The rate cut, the fifth since November, would be effective from Wednesday.The People's Bank of China (PBOC) said on its website on Tuesday that it would lower the one-year bank lending rate by 25 basis points to 4.6 per cent.
The move came as Chinese stock indexes nosedived more than 7 per cent on Tuesday to hit troughs not seen since December, and after shares had plunged over 8 per cent on Monday.
The latest policy easing also followed a shock devaluation in the yuan two weeks ago, a move that authorities billed as aiding financial reforms, but that some saw as the start of a gradual slide in the currency to help stumbling exporters.
"Frankly this shows a bit of panic in my mind," resident economist at Beijing's Conference Board, Andrew Polk, said.
"This is a big-bang move.
"It's meant to address some real issues and also prevailing market sentiment over the past two days."
One-year benchmark deposit rates were also reduced by 25 basis points, while the ceiling for deposit rates with tenures of over a year were scrapped to further free up China's interest rate market.
At the same time, the PBOC said it would also lower the reserve requirement ratio by 50 basis points to 18 per cent for most big banks. The change will take effect on September 6.
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Some analysts welcomed the moves as overdue, but warned it may not be enough to shield China from a slowdown that many suspect is much sharper than official figures suggest.
"Further monetary policy easing by the PBOC is still on the cards," economists at ANZ Bank said in a note.
Chinese premier Li Keqiang said there was no basis for the yuan currency to weaken further and the exchange rate would be maintained at a "basically stable" level, state media reported.
The exchange rate would be kept "basically stable at an adaptive and equilibrium level", Mr Li was quoted as saying.
Mr Li on Tuesday described the move by the PBOC to devalue China's currency as an "appropriate response" to developments in international financial markets, Xinhua reported.
"Such adjustment was also made as part of China's ongoing reform efforts," he said.
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