China cuts rates for fifth time as Japan suffers record exports drop
Tuesday December 23 2008
The US sold a record-large amount of debt yesterday and China cut interest rates for the fifth time since mid-September, as gloomy economic and corporate reports showed the world economy was stuck in a deep rut.
Japan reported its biggest-ever drop in exports in November, while eurozone industrial new orders in October posted the deepest plunge on record, providing the latest evidence that demand was falling more quickly than governments can respond.
"This is a truly global recession," Merrill Lynch economist David Rosenberg said, pointing to Japan's weak export figures, which included a 34pc drop in US shipments.
Meanwhile, the People's Bank of China announced another cut in lending rates, underlining the scale of problems facing the world's fourth-largest economy and the only major one that is still growing.
"The economy is slowing more sharply than expected and I think that's why the central bank rushed to cut rates again now," said Xing Ziqiang, economist at China International Capital Corp, in Beijing.
The cost of one-year bank loans would fall to 5.31pc from 5.58pc, while the benchmark one-year deposit rate falls to 2.25pc from 2.52pc.
Interest rates were lowered almost to zero in the US and Japan last week. But investors have flocked to the safe-haven of the US Treasuries market, even if parking money there means negligible returns, or even slight losses.
British central bankers -- who have cut rates by three percentage points since October -- warned interest rate cuts alone would not solve the financial crisis. Bank of England deputy governor John Gieve said Britain needed some form of new policy tool beyond the "blunt instrument" of interest rates.
- Global ECONOMY
