China cuts 1-year benchmark rate and doubles subsidies for EVs in its 'cash for clunkers' program

abcnews.go.com:

China has ratcheted up its efforts to spur slowing growth by cutting a key policy rate and doubling subsidies for electric vehicles bought to replace older cars

BANGKOK — China ratcheted up its effort to reinvigorate its slowing economy Thursday by unexpectedly cutting a key policy rate and also doubling subsidies for electric vehicles bought to replace older cars.

The People’s Bank of China said it cut its lending rate for one-year medium term policy loans by 20 basis points to 2.3%. That is the biggest rate cut since the world's second-largest economy was slammed by the COVID-19 pandemic in 2020.

The rate on 7-day loans was reduced to 1.7%.

Major state-run banks cut deposit rates, meanwhile, to relieve pressure on their finances, reducing the rate paid on one-year fixed deposits by 10 basis points to 1.35%, the official Xinhua News Agency reported, citing official rates released Thursday by the country's “Big Four” banks: Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank.

The banks cut deposit rates three times last year and this was the first reduction for 2024, it said. Earlier this week, the central bank cut several of its other lending rates, sticking to a cautious approach to stimulating the economy.

But while lower deposit rates may be good for the bank's balance sheets they won't encourage more consumer spending — the one thing most economists agree is needed to help revive growth that has been falling for years and was hit especially hard by a downturn in China's property sector.

“Banks are already passing on lower deposit rates to savers: which will do nothing to encourage spending in the current environment, and people will instead save even