A Chinese national flag flutters outside the headquarters of the People’s Bank of China, the Chinese central bank, in Beijing, April 3, 2014. Reuters/Petar Kujundzic
China’s central bank cut interest rates and lowered the amount of reserves banks must hold for the second time in two months on Tuesday, ratcheting up support for a stuttering economy and a plunging stock market that has sent shockwaves around the globe.
The moves came after Chinese stocks tumbled again on Tuesday, as investors despaired at the lack of policy action from Beijing in response to recent data suggesting the downturn in the world’s second-largest economy was deepening.
The People’s Bank of China (PBOC) said it was cutting the one-year benchmark bank lending rate by 25 basis points to 4.6 percent, cutting one-year benchmark deposit rates by the same amount, and reducing reserve requirements (RRR) by 50 basis points to 18 percent for most big banks.
Major Chinese stock indexes nosedived more than 7 percent on Tuesday, hitting their lowest levels since December, following a more than 8 percent plunge on Monday.
The plunge had resumed last week despite Beijing’s efforts to arrest a 30 percent crash earlier in the summer with hundreds of billions of dollars of state-backed share purchases.
This time, the government appeared to be sitting on its hands until Tuesday’s response, which aimed at shoring up economic fundamentals rather than underpinning stocks.
“Although this has some elements of giving comfort to the market, this is more about…