Message from interest cuts

The People's Bank of China, the central bank, announced on July 5 it will lower the benchmark interest rate of one-year deposits by 25 basis points and slash the one-year lending rate by 31 basis points effective July 6.

It is obviously an attempt to stimulate the declining economy. Yet the central bank still sent out some valuable messages. The central bank chose an unexpected time to cut interest rates in a bid to prevent market speculation.

The statistics departments will disclose economic data of the first half-year next week. It is universally believed that the data will further sap the market's confidence about the prospect of future economic growth. It has been less than a month since the central bank last cut interest rates, so many observers predict the central bank will not take any action until the economic data comes out.

Some speculative funds are also ready to take the opportunity to make some quick money. The central bank acted to avoid the speculation.

The European Central Bank also announced at about the same time that it will reduce its key interest rate from 1 percent to 0.75 percent, a record low for the eurozone, from July 11.

That the two important central banks chose the same time seems a coincidence. However, it also suggests that decision-makers around the world in economic and financial fields are aware of the importance of working with each other and choosing the right time to take action.

That the Chinese central bank cut different interest rates by different margins this time means authorities have already realized that the financial industry should play more-active roles in promoting the development of the real economy. This is badly needed for the Chinese economy today.

From Beijing News