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China Cuts Interest Rates for First Time in 6 Years

In Asia, as everywhere in the world, last week's news was dominated by the market chaos caused by the turmoil on Wall Street. But there also was other business news from the region. China's central bank cut its interest rate, for example, and Vietnam called on the European Union to cut taxes on exports of Vietnamese leather shoes. Claudia Blume reports from Hong Kong.

China's central bank cut its benchmark lending rate by 27 basis points to 7.2 percent - its first rate cut in six years. China also reduced the amount of cash banks must hold in reserve by one percentage point. Four leading banks, however, were not allowed to cut their reserves, which increases the amount of cash available to borrowers.

Over the past year, China had been preoccupied with fighting inflation and had tightened credit by rising interest rates as well as required bank reserves several times. But as consumer inflation eased this summer, the Chinese government has shifted its focus from tightening credit to spurring growth.

Ifzal Ali, chief economist at the Asian Development Bank, says it remains to be seen how far China's measures will go.

"If you notice that the cut in interest rates has been just 27 basis points and the reduction by one percentage points in reserve requirement does not apply to the four big banks - so this also indicates that the Chinese authorities are acting slowly on this front," he said. "They have certainly changed their focus from containing inflation to protecting growth, but how far this will go - only time will tell."

China and the United States held trade talks last week and reached a number of agreements, such as on the export of health-care and pharmaceutical products. China agreed to commit to a single set of standards on a range of health-care products and said it will step up cooperation with the U.S. to prevent the contamination of pharmaceutical products.

China also lifted a ban on poultry exports from six U.S. states. The ban was imposed a few years ago after a weak strain of avian flu was found in these states. Trade between the U.S. and China reached almost $400 billion last year.

Vietnam asked the European Union to end its anti-dumping duties on Vietnamese leather footwear, saying it harms local producers and workers. The EU introduced the tax in 2006 to combat an influx of cheap leather shoes from Vietnam and China.

Japanese business leaders think the country has fallen into a recession. This is according to a survey by the Japan Association of Corporate Executives. Most respondents said they expect the economy to recover next year.

And South Korean home appliance maker LG Electronics is selling specially made plasma TVs to its customers in the Middle East. Verses from the Koran can be read on screen and listened to via software embedded in the television. LG started selling the TVs in September, in conjunction with the Islamic holy month of Ramadan.