The central bank also trimmed its five-year loan prime rate by five basis points to 4.6%, the first cut to that rate since April 2020.
China’s loan prime rate is the rate at which commercial banks lend to their best customers, and it serves as the benchmark rate for other loans. The one-year maturity influences new and outstanding loans that must be paid back in a shorter time frame. The five-year one, meanwhile, usually serves as a reference for mortgages.
China’s GDP expanded 8.1% in 2021, according to government figures published earlier this week, but the pace slumped in the final quarter. Analysts expect the country could struggle even more this year, as the world’s second largest economy tries to stave off coronavirus outbreaks with its strict zero-Covid policy, and as the property crisis continues to fester.
Even Chinese President Xi Jinping — not normally one to remark publicly on economic policy — called on Western central banks earlier this week to avoid hiking interest rates too fast to fight inflation, as his country’s policies head in the opposite direction.
Before Thursday, China’s central bank had already been adjusting policy. It reduced an important lending rate to financial institutions earlier this week. And along with its cut to the loan prime rate last month, the central bank also slashed the reserve requirement ratio, which determines how much cash banks must hold in reserve.
China’s easing cycle is “in full swing,” wrote Sheana Yue, China economist for Capital Economics, in a note published Thursday.
“Today’s cut will immediately feed through to outstanding floating rate business loans and should…
Source : cnn
