Global markets rebound after China's new moves
China's central bank cut interest rates on Tuesday in a renewed effort to boost the country's economic growth.
The benchmark rate for a one-year loan will be cut by 0.25 percent to 4.6 percent and the one-year rate for deposits will fall by a similar margin to 1.75 percent, the People's Bank of China (PBC) announced.
The interest rate cut, the fifth in nine months, will take effect on Wednesday.
The PBC also reduced the minimum reserves banks are required to hold by 0.5 percent.
The move was described in a PBC statement as "promoting restructuring" to "stabilize the real economy."
"As economic growth continues slowing and global financial markets fluctuate, China faces a tough task to stabilize growth and needs to use the monetary policy tools more flexibly," the PBC explained.
The move has boosted global share prices further, with Wall Street's Dow Jones index opening more than 1.7 percent higher after the move, the BBC reported.
In mid-afternoon European trading, London's FTSE 100 was up almost 3 percent, while Germany's DAX and the Paris CAC were ahead by nearly 5 percent.
Most of the Asian markets have also stabilized after a number of Asian central banks, including the Bank of Korea and Bank Indonesia, said that they are ready to intervene.
Hong Kong's Hang Seng Index closed up 0.72 percent to 21,404.96 points, while the Korea Composite Stock Price Index gained 0.92 percent. India's BSE Sensex also rose 1.13 percent and Indonesia's Jakarta Composite jumped 1.56 percent.
'Exaggerated' concerns
While global markets have generally recovered from the "Black Monday" crash, Chinese mainland stock markets on Tuesday continued to slide to eight-month lows.
China's benchmark Shanghai Composite Index plunged 7.63 percent, or 244.94 points, to close at 2,964.97 points on Tuesday, falling below the psychologically-important 3,000-point level, and marked a new low since December 2014. The Shanghai index has dropped by 19.07 percent in August, the biggest monthly loss in six years.
The A-shares turmoil and worries over the Chinese economy were believed to have unsettled global markets the most, but experts said concerns could be exaggerated.
"China's equity markets haven't fully opened up to the world, so the impact of the A-shares debacle on global markets is very limited," Sun Wei, an associate professor at Peking University's School of Economics, told the Global Times.
According to Qian Qimin, co-director of the research institute of Shenwan Hongyuan Securities, as the engine of global demand, China's economy is undergoing a major adjustment which may be accompanied with certain consumption problems, but its GDP growth of about 7 percent remains relatively high, so it doesn't make sense to attribute a global slowdown to the Chinese economy.
Nobel Prize laureate Robert Shiller said in an interview with financial TV channel China Business Network on Tuesday that concerns over China's economy are overstated, considering that China's stock markets also fell sharply in 2007, and its economy didn't suffer that much.
Chinese Premier Li Keqiang said on Tuesday that there is no basis for continuing to devalue the yuan, adding that China's economic fundamentals have not changed and the government could achieve its main economic targets for the year.
Investors spooked
Also on Tuesday, the China Financial Futures Exchange announced it would raise the commission fees and deposit requirements in the trading of several major stock index futures.
The move was generally seen as another regulatory effort to curb market volatility.
A total of 647 billion yuan ($100.87 billion) changed hands on the two mainland bourses on Tuesday, much lower compared with the previous level of more than 2 trillion yuan in June, which shows that investors are spooked by the continuing market slump, some analysts said.
They added it is against this backdrop that many Chinese citizens hope China's securities regulators would again inject funds into the stock markets.
But analysts generally believe that this is unlikely to happen.
"The State-backed China Securities Finance Corporation injected funds last month because of a liquidity strain in the markets at that time, which may expose brokerages and banks to huge risks," Li Nian, an analyst at Shenwan Hongyuan Securities, told the Global Times. "So the 'national team' only solves the liquidity problem. As long as liquidity is OK, there is little chance that the 'national team' would continue to purchase stocks to prop up prices."
The tumble in China's stock markets has prompted police to investigate possible violations of the law.
According to the Xinhua News Agency, eight employees of CITIC Securities and one from China Securities Regulatory Commission were found to have participated in illegal securities trading. A reporter from Caijing Magazine was also found to have fabricated and spread false information on the stock markets.
Police have asked them to assist in their investigation, Xinhua reported, without providing further details.
