China Slashes Interest Rates and Eases Lending Rules to Revive Sluggish Economy

In a significant move to revive its faltering economy, China on Wednesday announced a series of sweeping monetary policy changes aimed at boosting consumption, lending, and investment. The announcement comes as the country continues to grapple with post-pandemic sluggishness, a deepening property sector crisis, and the weight of a protracted trade war with the United States.

At a press conference in Beijing, Pan Gongsheng, Governor of the People’s Bank of China (PBoC), revealed that the central bank will implement several key stimulus measures. These include a cut to a crucial interest rate and a reduction in the reserve requirement ratio (RRR)—the amount of cash banks must hold in reserve. The goal is to unlock more liquidity for lending and investment across the economy.

“These measures are intended to support technological innovation, expand domestic consumption, and enhance financial inclusion,” Pan said.

In a bid to reignite the property sector—once a cornerstone of China’s economic growth—Pan also announced a rate cut specifically targeting first-time homebuyers. For mortgage loans with terms over five years, the rate will be reduced from 2.85% to 2.6%. This move is designed to boost housing demand and stimulate a sector still reeling from a long-standing crisis marked by developer defaults, oversupply, and falling home prices.

Despite being the world’s second-largest economy, China has struggled to regain its pre-Covid growth momentum. Lingering effects from the pandemic, weak consumer confidence, and a mounting debt crisis in the real estate market have all weighed heavily on recovery efforts.

Compounding these challenges is the ongoing trade war with the United States. U.S. President Donald Trump has imposed tariffs as high as 145% on a wide array of Chinese imports, prompting Beijing to retaliate with its own set of 125% tariffs on U.S. goods. The tit-for-tat tariffs have created further uncertainty and disrupted trade flows.

These newly announced measures represent the most aggressive policy easing by the Chinese government since September. Economists believe they signal a renewed commitment by Beijing to stabilize the economy and reassure both domestic and international investors.

While it remains to be seen how effective these steps will be, the central bank’s bold action underscores the urgency of the situation. With global economic conditions tightening and geopolitical tensions rising, China is now betting on a stronger internal stimulus to navigate its way through turbulent times.