In the latest attempt to boost consumer spending, China’s largest state-run banks lowered interest rates on deposits this week. The rate cuts, the second such reductions since last year, reflect a growing concern that the world’s second-largest economy has not rebounded as strongly as expected after lifting its “zero-Covid” measures.
Six commercial banks all announced that they had lowered the rate for demand deposits, essentially a checking account, to 0.2 per cent from 0.25 per cent. The banks cut the interest rates on deposits covering a fixed period of time.
The Industrial and Commercial Bank of China cut the five-year deposit rate to 2.5 per cent from 2.65 per cent and lowered the three-year rate to 2.45 per cent from 2.6 per cent, according to the bank.
A reduction in the deposit rates is one lever that policymakers can use to stimulate spending. The hope is that the lower rates will give consumers an incentive to spend or invest money instead of parking their savings in the bank.
The move is an indication that consumer spending remains sluggish. After China scrapped its Covid restrictions, there were expectations that pent-up demand would push consumers to start spending freely — but that has not played out in many sectors of the economy.
New York Times News Service