China has implemented its first easing of lending benchmarks in 10 months in an effort to support its slowing economy. The one-year loan prime rate (LPR) was lowered by 10 basis points to 3.55%, while the five-year LPR was cut by the same margin to 4.2% from 4.30%. This move comes as China’s post-pandemic recovery starts to lose momentum, prompting the need for additional stimulus.
The People’s Bank of China (PBOC) had already lowered short- and medium-term policy rates last week, indicating its intention to further ease monetary settings to stimulate the economy. Analysts predict that more policy measures, such as property-easing measures and consumption support, will be rolled out separately to prevent sharp economic growth deceleration.
Julian Evans-Pritchard, the head of China economics at Capital Economics, stated, “These cuts will lower the cost of new loans, as well as interest payments on existing loans. That should offer some modest support to economic activity. But we think it is unlikely to drive a sharp acceleration in credit growth, given weak credit demand.”
Several global investment banks have revised their GDP growth forecasts for China after recent data showed a faltering recovery. Despite the easing of lending benchmarks, analysts believe that the impact on growth will be marginal and may not reverse the current growth slowdown.
The one-year LPR serves as the basis for most new and outstanding loans in China, while the five-year rate influences mortgage pricing. The designated commercial banks in China set the LPR rates by submitting proposed rates to the central bank on a monthly basis.
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Omprakash Tiwary is a business writer who delves into the intricacies of the corporate world. With a focus on finance and economic landscape. He offers readers valuable insights into market trends, entrepreneurship, and economic developments.
Denial of responsibility! Samachar Central is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.