In a decisive move to bolster economic growth, China has announced a significant reduction in its benchmark lending rates—the third cut this year—as it seeks to reduce financing costs and stimulate consumption and investment.
On Monday, the one-year loan prime rate (LPR), a key reference for corporate loans, was lowered from 3.35 percent to 3.1 percent. Simultaneously, the over-five-year LPR, which many lenders use to price mortgages, was reduced from 3.85 percent to 3.6 percent, as reported by the National Interbank Funding Center.
The unexpected depth of the cuts has caught the attention of market analysts. “The 25-basis-point cut in LPRs was slightly larger than the market expected,” noted Bruce Pang, chief economist at JLL Greater China. “The Chinese government needs to maintain a strong monetary policy while promoting the stabilization and recovery of the property market.”
Pang emphasized the strategic nature of China’s monetary policy adjustments. “The Chinese government generally does not cut interest rates as often as other economies,” he explained. “Therefore, when it does, the rate cuts need to be substantial enough to make an impact.”
The reduction in the over-five-year LPR is particularly significant for the housing market. By lowering mortgage rates, the government aims to encourage home purchases, thereby aiding the recovery of the property sector—a critical component of China’s economy.
This proactive approach reflects China’s commitment to navigating economic challenges amid global uncertainties. The rate cuts are expected to ease borrowing costs for businesses and consumers alike, fostering an environment conducive to growth and investment.
As the world’s second-largest economy continues to implement measures to reinforce its economic stability, these lending rate reductions signal a determined effort to stimulate domestic demand and maintain momentum in key industries.
Reference(s):
cgtn.com
