The Chinese mainland has taken a strategic step to stimulate its economy by reducing the market-based benchmark lending rates on Monday.
The one-year loan prime rate (LPR) has decreased from 3.45% to 3.35%, while the over-five-year LPR, which many lenders use as a reference for mortgage rates, has dropped by 10 basis points to 3.85%.
This monthly data serves as a crucial pricing reference for banks and is determined by the People's Bank of China's open market operations. Wen Bin, chief economist at China Minsheng Bank, highlighted that the reduction in LPRs is aimed at lowering financing costs for the real economy, encouraging both investment and consumption, expanding effective demand, and maintaining economic stability within a reasonable range.
Wen emphasized that the lower LPRs will further decrease mortgage loan costs and play a positive role in consolidating the recovery of the real estate market.
Bruce Pang, head of research and chief economist at JLL Greater China, commented on the LPR reductions, stating that the foundation for economic recovery in China still needs to be solidified. He pointed out that ongoing reforms in the loan market interest rate and adjustments to the market-oriented mechanism of deposit interest rates remain central to economic efforts. Pang stressed the importance of achieving a stable and steady decline in corporate financing and household credit costs from a policy perspective.
Reference(s):
cgtn.com
