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SHANGHAI: China stocks closed up on Tuesday after the central bank lowered a short-term policy lending rate in an effort to restore market confidence, although economic worries and geopolitical risks limited gains.

China’s blue-chip CSI300 Index added 0.5% at close, while the Shanghai Composite Index edged up 0.2%.

In Hong Kong, the benchmark Hang Seng Index rose 0.6% and the China Enterprises Index climbed 0.5%.

The People’s Bank of China (PBOC) cut its seven-day reverse repo rate by 10 basis points to 1.90% from 2% on Tuesday, to restore market confidence and prop up a stalling post-pandemic recovery. It is the first time the PBOC cut its short-term lending rates in 10 months.

Recent economic data on subdued demand and weaker investor sentiment raised expectations that authorities will ease monetary policy to sustain growth.

“The rate cut will help ease economic pressure and aid demand recovery, but it is not enough,” said Rocky Fan, economist at Guolian Securities. He said China needs more fiscal stimulus and may loosen property curbs.

“A sharp acceleration in credit growth is still unlikely and the recovery will continue to mostly depend on the service sector,” said Julian Evans-Pritchard, head of China economics at Capital Economics. Bloomberg reported on Tuesday, citing unnamed sources, that China was considering at least a dozen stimulus measures, including cuts to interest rates to support areas such as real estate and domestic demand.

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