China cuts interest rates after global day of panic

The People's Bank of China has cut interest rates for the fifth time since November

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The Independent Online

The People's Bank of China has finally acted after another terrible day of trading on Tuesday, which saw Shanghai stocks tumble another 7 per cent.

The bank has cut interest rates for the fifth time since November and lowered the amount of cash banks must set aside in an attempt to stop the stock market from falling further.

The move is an an attempt to keep China's economy growing towards its target and stop the market crash getting worse.

China has:

• Dropped the one-year lending rate by 25 basis points to 4.6 per cent effective Wednesday

• Dropped the one-year deposit rate 25 basis points to 1.75 per cent.

The turmoil in global markets started when the People’s Bank of China announced on August 11 that it was devaluing the yuan, which many saw as a desperate attempt to pump up exports in the face of a slumping domestic economy.

The decision saw $5 trillion wiped off global stocks in 11 days. When Beijing did not act to stop further losses over the weekend, markets suffered their worst day of trading since the financial crisis on Monday August 24. Around $74 billion was wiped off the value of the FTSE100 in a single day.

UK, German and French stock markets improved on Tuesday, with the FTSE100 index of multinational companies making gains of 3 per cent in morning trading. “After the market-wide panic of ‘Black Monday’ cooler heads seem to be prevailing this Tuesday morning as investors begin to pick up the pieces, even if China itself continues to struggle,” said Connor Campbell, financial analyst at Spreadex

But China suffered another day of losses. The state bank’s decision comes as Chinese prime minister Li Keqiang remains committed to economic growth of 7 per cent in 2015.

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