Headquarters of the People's Bank of China, China's central bank, in Beijing in October 2018. (Photo: IC)

China will adjust the benchmark deposit rate, the ballast of the national interest system, in due course, a Chinese central bank official disclosed on Saturday. 

The comments were interpreted by domestic financial experts as a signal that the country might soon cut its deposit rate to cushion the blow of the coronavirus outbreak on the domestic economy. 

“The PBC will adjust the benchmark deposit rate at an appropriate time and scale in the future, considering factors including economic growth and price levels,” said Liu Guoqiang, deputy governor of the People’s Bank of China, China’s central bank, on Saturday morning, according to financialnews.com.cn. 

Liu’s words sent out a message that China is considering cutting its benchmark deposit rate to bolster the economy, particularly consumption which has taken a serious blow from the coronavirus outbreak, said Xi Junyang, a professor at the Shanghai University of Finance and Economics. 

“China might cut the benchmark deposit rate as early as in March by 25 basis points,” Xi predicted to the Global Times. 

According to Xi, the negative impact from the coronavirus is manifesting. “Without strong policy stimulus, the country’s whole-year GDP growth might slip below 4 percent,” he said. 

It would be a bold step if the PBC were to cut the benchmark deposit rate, as it has not changed the rate for more than four years. The last cut to the benchmark deposit rate took place in October 2015, when the PBC cut the one-year deposit rate by 25 basis points to 1.5 percent. 

Xi said the government has been reluctant to lower the benchmark deposit rate because it is already at a relatively low level, and because China’s inflation level has been relatively high in recent months. 

“But faced with the influence of the unexpected epidemic, the country has no choice but to take some risks,” he told the Global Times, adding that lowering the deposit rate could boost consumption and stimulate investment. 

Liu also noted that the PBC will continue to push forward loan prime rate (LPR) reforms to guide down interest rate levels on banking loans significantly, so as to facilitate financing for micro enterprises. 

On Thursday, the PBC again cut the one-year LPR by 10 basis points, the largest among four cuts it has made since last August. The rate now stands at 4.05 percent.