New Delhi: On Monday, China reduced its key lending rates by 25 basis points. As per the experts, the move aimed at stimulating economic growth amid ongoing challenges in the property market and weak consumer demand. The People’s Bank of China (PBOC) announced that the one-year loan prime rate (LPR) is now 3.1 per cent, while the five-year LPR has been lowered to 3.6 per cent.
The one-year LPR affects corporate and most household loans, while the five-year LPR serves as a benchmark for mortgage rates.
This rate cut was widely anticipated after Pan Gongsheng, the PBOC governor, hinted last week that the central bank might reduce rates by 20 to 25 basis points. Speaking at a forum in Beijing, Pan also indicated that the reserve requirement ratio (RRR)—the amount of cash banks must hold in reserve—might be lowered again by 25 to 50 basis points by the end of the year, depending on the liquidity situation.
Pan added that medium-term lending facility rates will drop by 30 basis points, while the seven-day reverse repurchase rate—used for short-term loans between banks—will see a 20 basis point cut.
China: GDP Growth
There are signs of improvement in China’s economic outlook. Last week, the country reported a 4.6 per cent year-on-year GDP growth for the third quarter. Additionally, data released on Friday showed that retail sales and industrial production in September exceeded forecasts.