With lower lending rates, China boosts support for economic growth – Xinhua

Aerial photo taken on March 7, 2022 shows containers at Lianyungang Port in east China’s Jiangsu Province. (Photo by Wang Jianmin/Xinhua)

BEIJING, May 20 (Xinhua) — China cut the benchmark market-based policy rate on Friday, the latest move to support the economy.

The five-year loan prime rate (LPR), on which many lenders base their mortgage rates, fell 15 basis points to 4.45%, the National Interbank Funding Center said. It represents the largest reduction in this rate since the country revamped the LPR mechanism in 2019.

The one-year LPR came in at 3.7%, unchanged from the previous month.

The data released monthly is a price reference rate for banks and is based on the central bank’s open market operations rates, in particular the medium-term lending facility rate.

The reduction reflects China’s strengthened efforts to support the real economy, said Wen Bin, chief analyst at China Minsheng Bank.

“This is a key step to anchor market expectations, build market confidence,” Wen said, noting that it will boost demand for financing by reducing financing costs for businesses and lowering costs. funding for banks.

The five-year LPR was lowered by a “more than expected” margin, said Zhang Aoping, the dean of the Incremental Research Institute.

The latest rate cut follows a decision on Sunday to allow commercial banks to cut the lower limit on interest rates on home loans by 20 basis points for first-time home buyers, based on the LPR .

These measures will help the real estate market maintain stable and healthy development and boost overall demand, Zhang said.

China’s real estate industry, a vital sector for economic growth, is affected by the recent resurgences of COVID-19 and the volatility of the global situation which have impacted the economy.

The country’s economy was hit by the nationwide resurgence of COVID-19 cases in April. Authorities stressed that the negative impact would be short-lived.

China has taken steps to revive the economy and help businesses weather the tough times. These measures include increasing lending quotas, launching loan agreements for technological innovation, elderly care services, clean use of coal and encouraging local banks to lend more inclusive to small and micro enterprises through market-based means.

The central bank announced a reduction in reserve requirement ratios for financial institutions in April, adding sources of long-term and stable capital for the country’s financial institutions.

Measures including tax refunds and fee reductions, deferral of payment of social security contributions and smoothing of industrial and supply chains have also been taken to support market entities.

Central authorities called for an acceleration of the pace and greater efforts to implement macroeconomic policies, and urged local governments to come up with more measures in May to get the economy back on track.

Going forward, Wen expected the country to continue using structural monetary policy to bolster support for struggling industries and businesses and thus keep the economy within a reasonable range.

China’s economy is expected to head for a new round of recovery with the intensive implementation of macro and micro policies and countercyclical adjustments, Zhang said.

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