China’s central bank cuts interest rate as US tariffs threaten economy
A woman walks past the headquarters of the People’s Bank of China, the country’s central bank, in Beijing on July 9, 2024. (Photo by ADEK BERRY / AFP)
Updated at 1:35 pm on May 7, 2025
BEIJING, China — China on Wednesday eased key monetary policy tools in a bid to boost its ailing economy as it struggles with the effects of weak consumption and Donald Trump’s trade war.
The country’s leaders are battling to reignite growth, which has not fully recovered since the COVID-19 pandemic, crippled by sluggish domestic demand and a protracted property sector crisis.
That has been compounded by a punishing trade standoff that has seen the US president impose tariffs reaching 145 percent on many Chinese products and Beijing retaliate with 125 percent duties on imports from the United States.
READ: China’s central bank vows ‘moderately loose’ monetary policy
On Wednesday, the head of China’s central bank Pan Gongsheng told a news conference that Beijing would cut a key interest rate and lower the amount banks must hold in reserve in order to boost lending.
He said Beijing’s policies aimed “to support technological innovation, boost consumption, and promote inclusive finance, among other areas”.
A persistent crisis in the property sector — once a key driver of growth — also remains a drag on the economy.
In an effort to boost demand, Pan also said the bank would cut the rate for first-time home purchases with loan terms over five years to 2.6 percent, from 2.85 percent.
READ: China says will cut interest rates for first-time home purchases
The moves represent some of China’s most sweeping steps to boost the economy since September.
More help needed
But analysts pointed to a continued lack of actual stimulus funds needed to get the economy back on track.
“The policy measures released today are positive for the market and the economy,” Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said in a note.
“What is missing in this conference is new fiscal policy measures, which I think may be reserved for the future, if the economy suffers from the trade war and shows clear signs of slowdown,” he added.
Gary Ng, senior economist for Asia Pacific at Natixis, told AFP “it will take more to support growth”.
“If economic data does not improve, we will likely see more actions down the road,” he said.
Economists have warned that the disruption in trade between the tightly integrated US and Chinese economies could threaten businesses, increase prices for consumers and cause a global recession.
READ: China targeting growth of ‘around 5%’ in 2025 — official document
Manufacturing slump
Beijing last month blamed a “sharp shift” in the global economy for a slump in manufacturing.
And exports soared more than 12 percent in March as businesses rushed to get ahead of Trump’s swinging tariffs.
Beijing has said it is targeting annual growth this year of around 5 percent — the same as last year and a figure considered ambitious by many economists.
China last year announced a string of aggressive measures to reignite its economy, including interest rate cuts, cancelling restrictions on home buying, hiking the debt ceiling for local governments and bolstering support for financial markets.
But after a blistering market rally fueled by hopes for a long-awaited “bazooka stimulus”, optimism waned as authorities refrained from providing a specific figure for the bailout.
Analysts now think the impact of tariffs may lead Beijing to reconsider its caution and push ahead with fresh stimulus.
