What's going on?

China cut a key interest rate by a record amount in a bid to boost its struggling economy.

What does this mean?

China�s property slump and the government�s zero-Covid policy have left the country�s economy black and blue, with consumer spending and industrial output last month plunging to their lowest levels since the pandemic began. That�s left the country scratching its head as to how to mitigate the slowdown, and it seems to have hit upon a solution: it just announced a record cut to a key interest rate that underpins mortgage lending from 4.6% to 4.45%. The lower rate � which will be applied to new mortgages immediately and existing mortgages next year � is a significant move to boost demand for loans and prop up the country�s all-important property sector, which makes up around a quarter of the Chinese economy.

Why should I care?

The bigger picture: China has plenty in the tank.
China is under a lot of pressure to meet its own growth target of about 5.5% this year � a goal that�s looking increasingly unachievable as it keeps up its stubborn fight to eliminate Covid. But you can�t fault its chutzpah: Bloomberg estimates that the country will pump $5.3 trillion into its economy this year, in the form of government spending, interest rate cuts, and more. That figure equates to roughly a third of China�s economy, and it�s not even its upper limit: the country spent more on itself in 2020, suggesting it can raise the stakes even more if it needs to.

Zooming out: China and America could do a switcheroo.
China might believe its growth target is still achievable, but economists at Bloomberg certainly don�t: they�re convinced China�s economy will grow just 2% this year, compared to the US�s 2.8%. If they�re right about that, it�ll be the first time since 1976 that China�s economic growth undershoots America�s.