China eases monetary policy, slashes key rates as Donald Trump’s tariffs hit growth

May 7, 2025

China's central bank has implemented significant monetary easing measures, including interest rate cuts and a reduced reserve requirement for banks, in response to economic pressures. These pressures include renewed US tariffs and domestic weaknesses such as sluggish consumption and a struggling property sector.

China’s central bank rolled out major monetary easing measures on Wednesday, slashing a key interest rate and lowering the reserve requirement for banks as the economy reels under the pressure of renewed US tariffs and domestic weakness.

The People’s Bank of China (PBOC) announced a 0.25 percentage point cut to its lending rate for commercial banks, bringing it down to 1.5%, according to news agency AP.

The central bank also reduced the reserve requirement ratio (RRR), the amount of money banks must hold in reserve, by 0.5 percentage points in a bid to spur more lending.

The move marks one of the most significant policy interventions by Beijing since September 2024, and comes as US President Donald Trump’s sweeping tariffs, as high as 145% on many Chinese imports, begin to weigh heavily on China’s export-driven economy, AFP reported.

Pan Gongsheng, governor of the PBOC, confirmed the rate cuts at a news conference, saying the central bank would also lower its seven-day reverse repurchase rate to 1.4% from 1.5%.

The lending rate for first-time homebuyers taking out loans over five years will be reduced from 2.85% to 2.6% in an effort to revive demand in the struggling property sector.

Pan said the changes are part of broader efforts to “support technological innovation, boost consumption, and promote inclusive finance.”

[The Times of India]