China’s central bank on Tuesday cut a key benchmark lending rate used to price mortgages, as Beijing seeks to boost flagging growth and counter rate hikes in other major economies.
The five-year loan prime rate (LPR) was lowered from 4.2 to 3.95, the People’s Bank of China announced. The one-year LPR, which serves as a benchmark for corporate loans, remained unchanged at 3.45 percent.
The one-year rate was last lowered in August, while the five-year LPR had previously been reduced in June.
Closely followed by markets, both rates are at historic lows.
Tuesday’s moves are aimed at encouraging commercial banks to grant more credit and at more advantageous rates.
They come in stark contrast to most other major economies, which are raising rates to curb inflation.
The decision follows a series of mixed indicators for the world’s second-largest economy.
China last year recorded one of its worst annual rates of growth since 1990, dampening hopes for a rapid economic recovery following the end of draconian Covid restrictions in late 2022.
Officials have struggled for months to kickstart economic growth as they battle a range of headwinds, including a prolonged property-sector crisis, soaring youth unemployment and a global slowdown that has hammered demand for Chinese goods.
In January, consumer prices fell at their quickest rate in more than 14 years, piling pressure on the government for more aggressive moves to revive the country’s battered economy.
Deflation can be a brake on the profitability of companies and harms employment and demand in the long term.
Last month, Beijing announced it would cut the amount banks must hold in reserve, known as the reserve requirement ratio (RRR). – AFP
