China took fresh moves to free up money for its slowing economy, after global investors expressed concerns over Beijing's management of the world's number-two economy.
The country's central bank said in a statement on Tuesday that it cut interest rates by one-quarter of a percentage point and reduced bank-reserve requirements by one-half of a percentage point. The reserve-rate cut effectively adds 678 billion yuan (about $105.7 billion U.S.) to the Chinese economy.
The PBOC also dropped a key control on rates for some bank deposits, allowing lenders greater freedom to compete for business.
The move comes after days of market turmoil in China and around the world, sparked in part by worries that Beijing won't be able to stem market instability or rekindle slowing growth. China's main stock index fell 7.6% on Tuesday after an 8.5% fall on Monday, bringing it down more than 20% over four trading days. Markets from Tokyo to London to New York also fell on Monday, hitting everything from stocks to currencies to commodities, before stabilizing on Tuesday.
In a statement posted on its website, the People's Bank of China said the interest-rate cuts were aimed at reducing borrowing costs for Chinese companies, while the cut to bank-reserve requirements were intended to maintain "ample liquidity" in China's financial system.
The Wall Street Journal reported on Sunday that the PBOC was planning to flood the market with liquidity.
The question for investors is whether the PBOC's move Tuesday will restore--or further hurt--confidence in Beijing's handling of the economy and markets.
China has targeted year-over-year economic growth of about 7% for 2015, which already would be the slowest pace in a quarter century. New data since July have called into question its ability to hit that target.
Meanwhile, a surprise 2% devaluation earlier this month of the country's currency, the yuan, was taken by investors as a sign that economic growth is slowing more than Beijing had anticipated. The devaluation could help China's exporters, which have seen soft global demand for their products. But the central bank subsequently intervened in the currency market to keep investors from pounding the yuan still weaker, buying up yuan from circulation. That squeezed funds out of China's financial system.
