China’s central bank has cut interest rates for the third time in three months. Beijing hopes that these measures will encourage Chinese citizens to spend money again and companies to increase investment. The aim is to get the struggling economy back on track.
China’s economy is the second largest in the world, but it is facing many challenges. Unemployment is high, Chinese consumers are reluctant to part with their money and companies are reluctant to invest.
Then there is the struggling real estate sector. The sector is crucial to the economy, but companies are heavily indebted. For example, the real estate company Evergrande filed for bankruptcy protection in the US last week. Another company in the same sector, Country Garden, is struggling to meet its payment obligations.
These problems have caused the value of the Chinese currency (yuan) to fall to its lowest value since November last year. In addition, the government decided to stop publishing figures on the alarmingly high youth unemployment rate.
On Monday, the Central Bank decided to cut interest rates. It cut the interest rate on one-year loans by 0.1 percentage points. This interest rate is an important benchmark for businesses to take out loans and for consumers to make credit purchases.
The economy is now in a slump as Chinese consumers are saving more and spending less. Beijing has recently called on its citizens to spend more money. The move is aimed at stimulating economic activity.
