China cuts rates again as growth engine stalls

Source: Reuters

China's central bank cut interest rates on Friday for the sixth time in less than a year, and it again lowered the amount of cash that banks must hold as reserves in a bid to jump start growth in its stuttering economy.

Monetary policy easing in the world's second-largest economy is at its most aggressive since the 2008/09 financial crisis, as growth looks set to slip to a 25-year-low this year of under 7 percent.

Yet underscoring China's drive to deepen financial reforms, which many believe are necessary to invigorate the economy, the People's Bank of China (PBOC) said it was freeing the interest rate market by scrapping a ceiling on deposit rates.

The change, which Beijing had promised to deliver for months, will in theory allow banks to price loans according to their risk, and remove a distortion to the price of credit that analysts say fuels wasteful investment in China.

Read more: http://www.reuters.com/article/2015/10/23/us-china-economy-policy-idUSKCN0SH18W20151023

---

"Market role and government regulation both essential to China's economic reform
Chinese President Xi Jinping attached importance to two points in his speech during the two sessions of the National People's Congress and the Chinese People's Political Consultative Conference this year: Better respecting the law of the market and giving better play to the role of the government.

At the Third Plenary Session of the 18th CPC Central Committee, he emphasized that the market should play a decisive role in allocating resources and clearly pointed out that China implements a socialist market economy.

He said we should still insist on giving full play to the superiority of the socialist system as well as the positive role of the Party and the government, and that letting the market decide does not mean letting it decide all."
http://www.globaltimes.cn/content/829840.shtml

That's been the CCP's stand for years now, and while there are naysayers to their approach to managing the Chinese economy, well, from an outsider's perspective they don't seem to be doing that badly.

Some People claim it's all based on a bubble -- fueled by government spending on under utilized infrastructure projects. That might or might not be true but isn't THAT type of spending to encourage economic growth better than wasting trillions of dollars on war as we seem to have been doing in the US? Surplus infrastructure versus the Military Industrial Complex spending... you tell me which makes more sense.