Beijing, China — In a bid to revitalize its economy amid increasing trade tensions, China announced significant cuts to interest rates on March 6, 2025. The People’s Bank of China (PBOC), led by Governor Pan Gongsheng, revealed these measures at a press conference held during the third session of the 14th National People’s Congress.
The PBOC has decreased the seven-day reverse repurchase rate by 10 basis points, lowering it from 1.5% to 1.4%. This reduction is expected to subsequently decrease the loan prime rate by a similar margin. In addition, the central bank has decided to lower the reserve requirement ratio by 50 basis points, a move that is anticipated to inject approximately 1 trillion yuan (about $138.6 billion) of liquidity into the financial system.
Pan, addressing reporters alongside officials from the National Financial Regulatory Administration and the China Securities Regulatory Commission, emphasized that these actions are aimed at bolstering economic stability amid a challenging global landscape.
This announcement comes just hours before scheduled talks between Chinese Vice Premier He Lifeng and U.S. Treasury Secretary Scott Bessent in Switzerland. The discussions are set to focus on tariff and trade issues, marking the first confirmed negotiations between the two countries since the U.S. implemented steep tariffs on Chinese imports, which reached as high as 145%. In retaliation, China imposed its own tariffs on U.S. goods, significantly escalating the ongoing trade conflict.
The potential for renewed dialogue between the East and West is seen by many analysts as a critical juncture in the trade war, which has adversely impacted both economies and global markets. Investors are closely monitoring the situation, hopeful that these discussions may mitigate some of the uncertainty that has plagued international trade.
As the world’s two largest economies navigate these turbulent waters, the measures taken by the PBOC underscore China’s commitment to fostering domestic growth while balancing external pressures. The recent policy changes aim not only to stabilize the economy but also to potentially pave the way for a more conducive trading environment.
This developing story serves as a reminder of the intricate interplay between fiscal policy and international relations, with global markets on high alert for any signs of progress or setbacks in talks.