Anchor:
China's central bank has decided to slash lending and deposit rates by just over one percent with immediate effect.

This marks the fourth cut in three months.

The latest reduction is substantially larger than the previous three. It also is the largest cut since the Asian financial crisis.

In addition, as of next Friday, the reserve requirement ratio for large banks will be lowered by 1 percent and 2 percent for smaller banks.

What are these strong monetary policies aimed at achieving? And what kind of impact will the policies have on China's macro-economy?

Our reporter Dan Dan takes a closer look.

Reporter:
With the financial crisis spreading, the impact on China's real economy is expected to intensify next year. In addition to the 580 billion U.S. dollar stimulus package, experts say the current move will help China weather the global economic slowdown.

Zhao Xijun is a professor with the School of Finance at the Renmin University of China.

"The cut of interest rates and reserve requirement ratio this time is a demonstration to implement the moderately loose monetary policy. The objective of the measure is to further reduce the global financial crisis' impact on China's economy."

Early this month, the Chinese government decided to adopt "active" fiscal and "moderately loose" monetary policies, a key policy transition to spur economic growth.

Professor Zhao points out that the latest measure and the stimulus package will create favorable conditions for enterprises to develop their domestic market.

"When enterprises turn their attention to the domestic market, they will have to expand investment. Therefore, they will want to get loans from banks. And the cut in the reserve requirement ratio will allow the enterprises obtain money with lower interest rates more easily."

However, another economist argues that the government should not only focus its efforts on boosting investment from the government and enterprises.

Li Weisen, an economic expert from Shanghai-based Fudan University, says effective measures should be taken to reinforce common citizens' confidence and consumption.

"The government should raise disposable income of residents and strengthen their confidence in the future. That's another important way to boost domestic demand."

The economist stressed that people will still choose to save their money if they are not confident in the economy. He then called for the government to make more investment in the social security system to enhance the confidence of the general public.

Nevertheless, economists all agree that the latest action demonstrates once again the government is committed to taki all necessary measures to maintain economic growth.

Dan Dan, CRI news.