China’s central bank is taking steps to ease monetary conditions by supplying cash to its banking system and lowering interest rates. The one-year loan prime rate has been cut to 3.1% and the five-year LPR to 3.6%. The move was expected, as the central bank had indicated the rate cut earlier. The bank also mentioned the possibility of further lowering the reserve requirement ratio and other rates by the end of the year. While these measures are important, more fiscal stimulus may be needed to boost China’s economy, which is facing challenges such as weak demand and a property crisis. Despite these challenges, recent data shows slightly better than expected GDP growth and other positive indicators for the economy.
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