Wednesday, November 26, 2008

Steep rate cut in China by central bank

BEIJING (AFP) - China's Central Bank announced on Wednesday a steep cut in its interest rates -- by four times the usual margin -- in a signal that it would pull out all the stops to boost weakening economic growth.

The benchmark one-year lending and deposit rates will both be reduced Thursday by 108 basis points, compared with the usual 27 basis points in Chinese rate cuts, the People's Bank of China said.

"It means the government is moving on more fronts to stimulate growth," said Stephen Green, a Shanghai-based economist with Standard Chartered Bank.

It was China's fourth interest rate cut since mid-September.

Political Economy Research says what China needs is a massive redistribution of income from the Princelings to the People to boost the domestic market. However the Chinese nouveau rich are famous for one thing the tenacity to which they hold onto their money even if it wrecks the economy for the rest of us. If you need a recent example just look at Wall Street and the government give away to the super rich, in the current world view this helps the Economy - what has it done the cartoon below tells you.

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