Another cut in rates aims to boost China

BEIJING – China’s central bank cut interest rates for the second time in three months on Saturday, adding to signs that the country’s leaders are worried the economic slowdown is deepening too sharply.

The People’s Bank of China announced a rate cut on one-year loans by commercial banks by 0.25 percentage point to 5.35 percent. The interest rate paid on a one-year deposit was lowered by 0.25 point to 2.50 percent.

Last year, China’s economic growth fell to 7.4 percent – the lowest since 1990. It is expected to decline further this year, and a steep economic decline can raise the risk of politically dangerous job losses.

The latest round of cuts follow a string of tax reductions and other measures aimed at propping up growth. The government cut business taxes last week and has announced a pay hike for civil servants.

The lower rates are expected to reduce financial costs for state companies and are a signal to state-owned banks to boost lending to them.

Economic growth in the world’s second-largest economy has declined steadily over the past two years, mostly as a result of government efforts to steer the economy to more self-sustaining growth based on domestic consumption and to reduce reliance on trade and investment.

Official data released today showed that an index that measures China’s manufacturing activity went up slightly in February but still showed contraction amid China’s economy slowdown.

The latest monthly purchasing managers’ index was 49.9, up from January’s 49.8, China Federation of Logistics and Purchasing reported. The index uses a 100-point scale on which numbers below 50 show activity contracting. February’s reading meant activity contracted from the previous month.