PBOC's dual cut to lower costs of financing for enterprises

ON FRIDAY, the People's Bank of China, China's central bank, announced its decision to cut interest rates for the sixth time in a year and reduce the reserve requirement ratio for banks. The PBOC's "double cut" took effect from Saturday. Comments:

The PBOC's latest "double cut", which is supposedly designed to stabilize economic growth to improve monetary conditions, has a lot to do with the fact that the country is yet to recover from the recent economic downturn. The September Consumer Price Index came in at around 1.6 percent, meaning that there will be limited room for another cut in interest rates, which calls for closer coordination between a variety of monetary policy weapons. Lifting the ban on interest rates, to some extent, signals the end of market-oriented reforms of interest rates, but the central bank's indirect guidance is still needed to nip the dog-eat-dog competition between banks in the bud.

Guo Tianyong, head of the China banking research center at the Central University of Finance and Economics, Oct 23