China’s central bank cut interest rates to record lows to revive grappling economy

China’s central bank on Tuesday slashed two major interest rates to a historical low, in efforts to inject fresh momentum into the economy struggling with weak consumer demand, ongoing property crisis, and deepening trade tensions with the United States.The People’s Bank of China announced cutting its one-year loan prime rate (LPR), a key reference for household and business lending, trimming it from 3.1% to 3.0%. The five-year LPR, typically used for mortgages, was also lowered by 10 basis points to 3.5%.These are the lowest rates recorded since the LPR was introduced, and mark the first such cuts since October.The move comes days after Beijing and Washington agreed to temporarily ease tariffs in their protracted trade dispute, giving both sides a 90-day window to de-escalate tensions.Zichun Huang, China economist at capital economics, said that the cuts would offer some relief to heavily indebted companies and households, quoted by AFP.“The rate cuts will reduce interest payments on existing loans, taking some pressure off indebted firms. It will also reduce the price of new loans,” Huang noted, adding “But modest rate cuts alone are unlikely to meaningfully boost loan demand or wider economic activity.”He also suggested that more rate cuts could be on the horizon, noting that these latest reductions might not be the last this year.For 2025, the Asian giant has an annual GDP growth estimate set at 5% which the analysts perceive to be challenging considering the economic headwinds it is facing. However, the first quarter gave unexpectedly strong results with a 5.4% annual expansion, as per preliminary estimates.Mixed pictureFresh data released by the National Bureau of Statistics shows a complex situation, with the country’s industrial outputs growing at a rapid rate for the last month, despite the Washington-Beijing trade war, however retail and property sectors slipped.For the month of April, industrial production rose by 6.1% surpassing expectations. However, it was still down from March’s 7.7% rise. Meanwhile, retail sales surged 5.1%, falling short of Bloomberg’s 5.8% forecast, signaling sliding consumer demand.Additionally, cost for new homes fell in 67 out of 70 cities last month, a clear sign of the ongoing slump in the property sector, which continues to drag down economic confidence and spending.