China’s Central Bank Announces Surprise Rate Cut to Boost Growth

Chinese President Xi Jinping attends an event commemorating the 110th anniversary of Xinhai Revolution at the Great Hall of the People in Beijing on Oct. 9, 2021. China was one of the biggest stories of 2021. Top stories included its human rights records in the Xinjiang region, Tibet and Hong …
AP Photo/Andy Wong

China’s central bank on Monday cut a key interest rate for the first time since April 2020 in an effort to lift economic growth that has been dragged down by a sagging real estate market and a series of virus outbreaks and lockdowns.

The People’s Bank of China announced that it is lowering the interest rate on one-year loans it makes to banks by 10 basis points to 2.85 percent.

While most major economies are suffering from a greater than expected surge in inflation and supply constraints, China at the end of the year appeared to have been stricken with a greater than expected economic slowdown. Official government statistics showed growth slowing to a four percent pace in the final quarter of 2021. That beat expectations of U.S. analysts, who predicted the economy would grow at a 3.3 percent rate, but data from December suggests the economy continued to slow at the quarter progressed.

The rate cut came as a surprise to Wall Street and  U.S. analysts. Reuters reported that 70 percent of analysts surveyed had predicted no change to the medium-term lending facility or MLF. While some monetary easing was expected, this came sooner than anticipated.

Retail sales rose by less than expected in December and the unemployment rate ticked up to 5.1 percent, one-tenth of a point higher than the previous month. Investment slowed by more than expected at the end of year, according to official statistics.

The move indicates that China’s leadership is concerned that

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