China cuts lending rates a series of times

 China cuts lending rates a series of times

China continues to lower interest rates as the country's authorities try to prevent the economy from falling deeply.

The People's Bank of China (PBOC) today lowered the one-year basic lending rate by 0.1% to 3.7% a year. This is the second time in a month they lower this rate.

The PBOC also lowered its 5-year basic lending rate by 0.05% to 4.6%. This is the first time they have lowered this interest rate since April 2020.

Interest rates on 1-year loans will affect new loans and existing loans that mature in a short time. The 5-year interest rate is often used as a reference for mortgage loans.

Today's PBOC decision is the latest in a series of efforts China has made to ease monetary policy. Authorities are dealing with a plunging property market and slowing economic growth.

China grew 8.1% last year. However, the growth rate slowed down in the last quarter of the year. Analysts predict the country will struggle even more this year, when applying a zero covid policy with strict blockade measures. Besides, the crisis in the real estate sector shows no sign of stopping.

Even Chinese President Xi Jinping - who usually does not comment publicly on economic policy - earlier this week urged Western central banks not to raise interest rates too quickly to contain inflation, amid Beijing is having to do the opposite.

Before that, the PBOC also adjusted many policies. This week, they lowered lending rates important to financial institutions. Last month, they lowered the reserve requirement ratio for banks.

The Hong Kong stock market this afternoon rallied after the decision of the PBOC. This index closed up 3.4%. The gain was led by technology and real estate stocks.

"China will roll out more easing measures in the next few months," said Sheana Yue, chief China economist at Capital Economics. She thinks it is very likely that the PBOC will further lower the one-year basic lending rate.