The vow by China’s leaders last month to address the “new difficulties and challenges” besetting the world’s second-largest economy appeared to open the way for bolder government measures to stimulate activity.
But a subsequent call by the People’s Bank of China for banks to be allowed to make a “reasonable profit” helps explain why smaller-than-expected reductions to core lending rates were unveiled on Monday.
Experts said the smaller-than-expected cuts highlighted a dilemma for Beijing: how to balance any desire to stimulate the stuttering economy, by reducing borrowing costs, with the need to preserve the stability of China’s $56tn banking system as well as support its weakening currency.
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