China Lowers Borrowing Costs For Companies And Households To Encourage Consumption
OpenLife Nigeria reports that China’s central bank has cut key lending rates. This was announced early Tuesday following a monthly meeting.
This includes a mortgage-linked benchmark which is essentially designed to encourage investment and consumption after the country’s post-pandemic recovery softened over the last five months.
In the new arrangement, the People’s Bank of China (PBoC) lowered the one-year loan prime rate by 10 basis points to 3.55% from 3.65%, while trimming the five-year rate by 10 basis points to 4.2% from 4.3%. The moves will lower borrowing costs for companies and households.
The last time the PBOC eased the rates was in August 2022 after a two-month COVID-19 lockdown in Shanghai took a toll on the economy.
Key economic indicators, including industrial production and retail spending, slowed in April and May after the world’s No. 2 economy posted better-than-expected growth of 4.5% in the first quarter. The jobless rate among youth hit a record 20.8% while real estate investment contracted 7.2% in May.
Most new and outstanding loans in China are based on the one-year loan prime rate, while the five-year rate influences mortgage pricing. The property sector is reeling from scores of housing projects left unfinished by debt-swamped developers.
Earlier, the Chinese central bank cut the rate on its medium-term lending facility loans to some banks by 10 basis points to 2.65% from 2.75%, while lowering its seven-day reverse repo rate, the key rate at which it supplies short-term liquidity to banks, from 2.00% to 1.90%.
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