The Chinese central bank cut interest rates for the third time in three months. Beijing hopes this will encourage the Chinese to give their money back and companies to invest more. This would put the weak economy back on track.
China’s economy is the second largest in the world, but it is currently facing many challenges. Unemployment is high, Chinese consumers are hoarding their money, and companies are investing little.
Then there is the struggling real estate sector. This is very important for the economy, but companies have a lot of debt. For example, real estate company Evergrande filed for bankruptcy protection in the US last week. Its sector colleague Country Garden is struggling to meet its payment obligations.
Because of the problems, the Chinese currency (yuan) exchange rate fell last week to its lowest level since November last year. The government also decided to stop publishing figures related to the unprecedentedly high rates of youth unemployment in the country.
On Monday, the central bank decided to cut interest rates. The one-year loan rate fell by 0.1 percentage point. This interest rate is an important criterion for loans obtained by businesses and for consumers who want to buy something on credit.
Part of the reason is that Chinese consumers are now buying less and saving more, which has sent the economy into recession. Beijing recently called on the population to spend more money.
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