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China Cuts Rates To Boost Economy

Aug. 25, 2015, 2:09 p.m.

China has cut its main interest rate to boost growth in its economy.

The People's Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.

It is the fifth interest rate cut since November and will take effect on Wednesday.

The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.

In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.

On other European markets, Lisbon, Madrid, Moscow and Milan were all sharply higher.

China has cut its main interest rate to boost growth in its economy.

The People's Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.

It is the fifth interest rate cut since November and will take effect on Wednesday.

The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.

In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.

On other European markets, Lisbon, Madrid, Moscow and Milan were all sharply higher.

The main Shanghai Composite index closed Tuesday's session down 7.6% at 2,964.97 points. Japan also saw more sharp falls, sending Tokyo's Nikkei index down 4%.

The global sell-off has been driven by fears that China's slowing growth means less business for everyone else.

China's booming economy of the last 30 years has seen the country suck in supplies of raw materials for manufacturing and, increasingly, manufactured and luxury goods from other countries.

The government, which has both money and the power to influence what are not free markets, has taken steps to lower the value of the yuan in order to boost demand for Chinese goods overseas.

Although very few Chinese people own shares - only about 2% of the population - they are extremely active on its stock market. They are responsible for the majority of daily turnover and the government is trying to ameliorate the impact of the trading rout on those individuals.

Many bought shares with borrowed money, and as those investments fall in value, they are now selling them to pay back their debts.

The interest rate cut should make their debt levels a little more bearable.


Source: BBC

Disclaimer: The views expressed in this news report do not necessarily reflect the views of the National Development Planning Commission(NDPC)

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