...of competitive devaluation.
When you are a price insensitive purchaser of foreign bonds (in order to prop up your flailing export industry), this seems like a rational response...unless you also have inflation approaching 8%.
BEIJING (Reuters) - China's central bank, acting against a background of extreme stress in global financial markets, cut benchmark lending rates by 0.27 percentage point on Monday.
The cut lowers the cost of one-year bank loans to 7.20 percent.
Benchhmark deposit rates remain unchanged with the one-year rate at 4.14 percent.
The People's Bank of China also cut the reserve requirement for all except the country's five biggest banks and the Postal Savings Bank by 1 percentage point.
It is the first time that the central bank has lowered the proportion of deposits that lenders must hold in reserve since November 1999.