The People's Bank of China (PBOC) cut its benchmark interest rate on Sunday by 25 basis points (bps) to 5.1 percent and dropped the one year benchmark deposit rates to 2.25 percent in order to stimulate the world’s second largest economy who has slowed down to its lowest pace since the global financial crisis.
"Currently, the pace of domestic economic restructuring is quickening and the fluctuation of external demand is relatively big. China's economy is still facing relatively big downward pressure," said PBOC.
In an attempt to pick up the descending economy, the Chinese central bank has cut interest rates and relaxed their bank’s reserve requirements for the fifth time since November, leading analysts expect a further policy easing over the next few months.
The World's second largest economy is struggling to pick up pace as it heads towards the second quarter.
Growth declined to 7.4 percent in 2014 while the country’s growth target fell to 7 percent in 2015.
"Currently, the pace of domestic economic restructuring is quickening and the fluctuation of external demand is relatively big. China's economy is still facing relatively big downward pressure," the PBOC said.
China faces a high risk of unemployment while their trade industry slumped to 6 percent in the first quarter. The fragile economy suffered further when imports and exports contracted in April.
The new lending rate, effective as of May 11, is expected to lower financial costs for government owned state run companies while boosting lending for state owned banks.