The mechanics of how the Chinese government supports its economy are a little complicated (you can learn more here). Put simply, it does things that push down interest rates when it wants to be supportive as that encourages borrowing and, thus, spending to boost the economy. In recent months, however, China has been pushing up interest rates, partly because it doesn’t want its economy to get artificially “overheated” (which can cause bubbles to build).
For markets: China’s actions had risen to the top of investors’ list of worries.
According to a widely followed survey released on Tuesday, global investors think the prospect of the Chinese government paring back support for its economy is the biggest risk to global stocks right now (supplanting political risk in Europe). If Tuesday’s move is indeed signaling that the Chinese authorities will only ease support very cautiously, that’s likely a positive for global investments (at least in the near term).
The bigger picture: China will probably provide less of a tailwind to global markets this year than last year.