China has cut its main interest rate to boost growth in its economy.
The People’s Bank of China cut its main interest rate by 0.25 percentage points to 4.6% after two days of stock market turmoil.
It is the fifth interest rate cut since November and will take effect on Wednesday.
The move has boosted European share prices further, with the FTSE 100 in London jumping 3.3% after the China move.
In Germany, the Dax was up by 4.4% and in Paris, the Cac was ahead by 4.6%.
On other European markets, Lisbon, Madrid, Moscow and Milan were all sharply higher.
The People’s Bank, according to BBC, said that the interest rate cut was to reduce “the social cost of financing to promote and support the sustainable and healthy developments of the real economy”.
It also acted to increase the flow of money in the economy by cutting the amount of cash banks must keep in reserve, effectively freeing them to lend more cash.
The Chinese authorities have taken a number of steps to help stem stock market losses since the market began a series of heavy falls in June.
Earlier, China’s falling stock market had hit markets around the globe on Monday, and – although Asian markets were again hit overnight – European stocks had already opened in a more optimistic mood on Tuesday.
The main Shanghai Composite index closed Tuesday’s session down 7.6% at 2,964.97 points. Japan also saw more sharp falls, sending Tokyo’s Nikkei index down 4%.
The global sell-off has been driven by fears that China’s slowing growth means less business for everyone else.
China’s booming economy of the last 30 years has seen the country suck in supplies of raw materials for manufacturing and, increasingly, manufactured and luxury goods from other countries.
Posted by Janice Johnson
