China cuts rates to support economy amid US trade tensions

China’s central bank said it would lower interest rates and add more money to the financial system to support the economy during trade tensions with the U.S. These steps are China’s first major move since the U.S. raised tariffs in April. The central bank will cut the amount of money banks must keep in reserve, which will free up about $139 billion for lending. It also cut key interest rates, aiming to make loans cheaper.

The focus is on increasing spending inside China, especially in services like restaurants and entertainment. But no new government spending plans were announced. Some experts say these might come later if the economy slows more. The government hopes these changes will encourage people to spend more, though confidence remains weak due to a property crisis and worries about trade.

Retail sales and holiday spending are starting to grow, but they are still below pre-COVID levels. While China’s economy grew 5.4% in the first quarter, signs of trouble are emerging—export orders are down, and factories are cutting back. Officials remain confident about reaching a 5% growth target, but many economists think growth may drop below that if no trade deal is reached. More help for the economy is expected soon.