I'm not quite convinced that cutting interest rates is as wise as believed. Recklessly cutting rates may blow up credit bubbles. There are reasons to believe that China already suffers from a credit bubble. The bubble may be comparable to Thailand or Spain at the times when their own credit booms peaked:
According to Stockman:
"Chinese GDP growth has been closely tracking Macau gaming-revenue growth since 2006, including the sudden cliff-dive during the financial crisis and the vertigo-inducing recovery afterwards, and at nearly every twist and turn since.
So they’re suddenly expected to decouple, with Macau gaming revenues in free fall, and the Chinese economy, where these missing high-rollers are making their money, growing at over 7%? Miracles do happen, but they’re rare.
More likely is that the Chinese economy is wheezing from the impact of lackluster demand, a credit bubble that is threatening to blow up, and a crackdown on corruption, the grease without which the economy has trouble functioning. The biggest beneficiaries of that system have gotten antsy and are reacting in a myriad ways. And Macau’s gaming revenues – just as they did during the financial crisis – show thermometer-like that the Chinese economy, despite official protestations, is turning cold."