China Cuts Rates to Boost Economy Amid US Trade War

On May 7, 2025, China announced bold measures to revive its struggling economy, including a key interest rate cut and a reduction in bank reserve requirements. These steps come as the world’s second-largest economy grapples with low consumption, a property sector crisis, and escalating trade tensions with the United States. This article dives into China’s economic strategy, its historical context, and offers a taste of Chinese culture with a Mapo Tofu recipe. China economy

China’s Economic Measures

China’s central bank chief, Pan Gongsheng, announced a 0.5 percentage point cut in the reserve requirement ratio, freeing up funds for banks to lend. Additionally, the seven-day reverse repurchase rate was lowered from 1.5% to 1.4%. These policies aim to “support technological innovation, boost consumption, and promote inclusive finance,” Pan said during a May 7, 2025, news conference. The moves are expected to inject liquidity into the economy, which has struggled to recover fully since the Covid-19 pandemic.

China faces multiple challenges: sluggish domestic demand, a protracted property sector crisis, and a manufacturing slump attributed to global economic shifts. Exports surged 12.7% in March 2025 as businesses rushed to ship goods before new US tariffs, imposed by President Donald Trump, took effect. However, economists warn that the US-China trade war could disrupt tightly integrated supply chains, raise consumer prices, and risk a global recession. Reuters reported on these developments.

China’s Central Bank Headquarters. Source: Unsplash

Historical Context: The Great Leap Forward

China’s current economic caution reflects lessons from its past. A notable historical event, the Great Leap Forward (1958–1962), was Mao Zedong’s ambitious campaign to rapidly transform China’s agrarian economy into an industrial powerhouse. The policy led to widespread famine, with estimates of 15–45 million deaths due to mismanagement and unrealistic targets. Today, China’s measured approach—cutting rates and reserves rather than launching massive stimulus—suggests a desire to avoid such catastrophic missteps while addressing modern challenges like the US trade war. Great Leap Forward

Traditional Chinese Dish: Mapo Tofu Recipe

Amid economic shifts, Chinese cuisine remains a global favorite. Try this spicy, flavorful Mapo Tofu, a Sichuan classic:

• Ingredients:
  • 400g soft tofu, cubed
  • 150g ground pork
  • 2 tbsp Sichuan peppercorns, crushed
  • 2 tbsp doubanjiang (fermented bean paste)
  • 1 tbsp soy sauce
  • 1 tsp sugar
  • 2 cloves garlic, minced
  • 1 tbsp ginger, minced
  • 1 cup chicken broth
  • 2 tbsp vegetable oil
  • 2 green onions, chopped
  • 1 tsp cornstarch mixed with 2 tbsp water
• Instructions:
  1. Heat oil in a wok, add Sichuan peppercorns, and stir-fry for 30 seconds. Remove peppercorns, leaving oil.
  2. Add garlic, ginger, and doubanjiang. Stir-fry for 1 minute.
  3. Add ground pork, cook until browned.
  4. Stir in soy sauce, sugar, and chicken broth. Bring to a simmer.
  5. Add tofu cubes, gently stir, and simmer for 5 minutes.
  6. Add cornstarch slurry to thicken sauce.
  7. Garnish with green onions and serve with rice.

This fiery dish reflects the bold spirit of Sichuan, offering comfort during uncertain times. Chinese cuisine

Global Implications

China’s rate cuts signal a proactive stance, but the US-China trade war looms large. Tariffs and disrupted supply chains could exacerbate inflation and slow global growth. Beijing’s focus on innovation and consumption aims to build resilience, but success depends on navigating both domestic and international pressures. As the world watches, China’s next steps will shape markets and geopolitics alike.

Author: Planet-Today.com via AFP