China Unexpectedly Cuts Interest Rate as World Markets Sag

China’s central bank on Thursday cut a key interest rate, in Beijing’s second move this week to try to offset a weakening economy and a housing market crisis.

The unexpected action came as stock markets fell sharply across most of Asia, in an echo of Wall Street’s sharp drop the day before. Market indexes fell roughly 1 to 3 percent in Australia, Japan, South Korea and Hong Kong.

But share prices were down by less in Shanghai and Shenzhen. That could reflect a favorable response by investors to the central bank’s rate move, or a sign of intervention by the Chinese government, which plays an extensive role in the country’s stock markets.

As markets opened in China on Thursday, the People’s Bank of China, the central bank, reduced its interest rate for one-year loans to commercial banks to 2.3 percent, from 2.5 percent. It was the biggest cut to that rate since a similar reduction in April 2020, when the Chinese economy was struggling because of a nearly national lockdown in the early days of the coronavirus pandemic.

The central bank surprised markets because it normally reviews the one-year loan rate only on the 15th of each month. It kept the rate steady on July 15, and also left it unchanged on Monday when it adjusted other rates.

The People’s Bank of China said in a statement only that Thursday’s rate cut was intended to “maintain reasonable and sufficient liquidity in the banking system at the end of the month.”