China Cuts Interest Rates to Protect Jobs

China's central bank cut interest rates for the fifth time in four months today in a desperate bid to revive the country's flagging economy and stave off further job losses.

The People's Bank of China cut its benchmark one-year lending and deposit rates by 0.27 percentage points to 5.31% and 2.25% respectively.

The bank slashed 1.08 percentage points off rates four weeks ago in its biggest cut for 11 years.

Today's cut was much less than most economists had expected. "We would have thought that given the US action, and the ? central bank action around the world, the [People's Bank] would have been inclined to go further," said Ken Peng, an economist at Citigroup.

"Apparently they think this will be sufficient to maintain financial stability in the near term."

China's economy has slowed significantly since the collapse of US investment bank Lehman Brothers in September. The country's factory output grew at a record slow pace for a non-holiday month in the year to November and exports declined for the first time in more than seven years.

Xing Ziqiang, economist at China International Capital Corp, said: "The economy is slowing more sharply than expected and I think that's why the central bank rushed to cut rates again now."

Economists at research group IHS Global Insight predicted China's GDP growth would slow from 11.9% in 2007 to 9.4% this year and 7.4% in 2009.

Thousands of factories have closed as global demand for Chinese exports has continued to wane, leading to protests at rising unemployment. Workers have also clashed with police in protests over unpaid wages.

Domestic industries such as property and car sales have also suffered in the credit crunch.