Chinese Central Bank Announces Interest Rate Cuts to Boost Economy in 2025
A senior economic official in China confirmed on Thursday that the country will further reduce interest rates next year to boost the national economy.
In a statement during a press conference, Pan Gongsheng, Governor of the People’s Bank of China, said, “We will reduce the reserve requirement ratio and interest rates as necessary, based on the domestic and international economic and financial conditions.”
The reserve requirement ratio (RRR) refers to the proportion of customer deposits that commercial banks must hold in reserve with the central bank. This ratio is one of the key tools the central bank uses to control the money supply in the economy, affecting the ability of commercial banks to lend and, consequently, the amount of money circulating in the economy.
The importance of the reserve requirement ratio lies in the fact that an increase reduces the ability of banks to lend, which helps curb inflation. On the other hand, reducing the ratio increases the banks’ ability to lend, thereby stimulating economic growth.
China also announced yesterday that it will stick to its growth target of around 5% for 2025, despite global challenges such as the looming trade war.
Zheng Shanjie, head of the National Development and Reform Commission (NDRC), which is responsible for economic planning, assured in a press conference on Thursday that the government is confident in its ability to meet this growth target, despite rising external uncertainties and insufficient domestic demand. He added that China would launch major projects in key sectors such as railways, nuclear energy, and water conservation to attract private sector investment.
The GDP growth target was outlined in a report presented by Premier Li Keqiang during the opening session of the National People’s Congress, China’s legislative body, reflecting the government’s ambition to boost growth amid current economic challenges.
The Chinese economy continues to face persistent challenges, including a prolonged crisis in the real estate sector, slowing consumer spending, and weak private sector investments.