A Week after Cutting Key Rates, China Has Trimmed Lending Rates Yet Again

It was just last week when the People’s Bank of China cut the lending rates. However, the Chinese regulator has gone at it and it has cut lending rates yet again.

China Trims Lending Rate

According to the latest updates, the People’s Bank of China (PBoC) has cut lending rates once again. The Chinese regulator announced another cut in the lending rates on Monday.

This was an announcement and an economic decision no one had expected from the People’s Bank of China. Following the announcement, the majority of the economists and market analysts have shared their concerns.

They have called out the People’s Bank of China’s move to be an idiotic and disastrous one. Many are criticizing how the People’s Bank of China may have made things worse for their economy.

The reason behind the Move

According to the People’s Bank of China, they have made this move to try and fire up the economy. They want to do it by reviving credit demand in the country.

The country’s economy has been badly impacted by property debt problems. The majority of the losses the country has been facing in terms of its economy are due to the COVID lockdowns.

Almost every day, new cases have been emerging of COVID-19 in China. Therefore, the country has been trying hard to handle the situation.

China has even imposed lockdowns all over the country and most importantly, in the Shanghai region. Shanghai is the business hub for China and closing it down has caused huge dampness in the country’s economy.

Therefore, to fight off this situation and bring the economy back to normal, China has been doing whatever is necessary.

China Reduces Loan Prime Rate

According to reports, the People’s Bank of China has reduced the loan prime rate for 5-years at a significant rate. The report suggests that the particular has been reduced by 15bps.

Following the reduction, the 5-year loan prime rate has been reduced to 4.30%. Prior to the reduction, the loan prime rate was 4.45%.

As for the one-year loan prime, the rate has been reduced by 5bps. After the reduction, the 1-year loan prime rate has been brought down to 3.65%.

For the record, the majority of the new loans in the Republic of China are one-year LPR-based.

In the past week, the PBoC had reduced the 1-year MLF loans by 10bps.

China’s Economic Condition

According to many economists, the Chinese economy does not have a bright future ahead. The economists have been downgrading the economy of the country from their end.

Goldman Sachs has also lowered the forecast for China’s growth for the rest of the year. They posted that China’s economic growth would be 3.0%. Previously, they had predicted China’s growth to be 3.3%.

As the situation keeps moving south for China, its currency’s value may also continue falling deeper.