Beijing August 21 2023: In a move aimed at boosting credit demand and countering concerns about a weakening currency, China reduced its one-year benchmark lending rate on Monday.
Surprisingly, the authorities opted to keep the five-year rate unchanged. This decision comes against the backdrop of a slowdown in the second-largest global economy, attributed to a decline in property values, reduced consumer spending, and a notable decrease in credit expansion.
As a response, there is growing support for increased policy stimulus measures to rejuvenate economic growth. The adjustment saw a decrease of 10 basis points in the one-year loan prime rate (LPR), settling at 3.45% from its previous 3.55%, while the five-year LPR remained steady at 4.20%.
Most new and outstanding loans in China are based on the one-year LPR, while the five-year rate influences the pricing of mortgages. China cut both LPRs in June to boost the economy.
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The majority of both new and existing loans in China are tied to the one-year Loan Prime Rate (LPR), which serves as the basis for their interest rates. Meanwhile, the five-year LPR has a direct impact on the pricing structure of mortgages. In June, China had previously reduced both the one-year and five-year LPRs as part of its efforts to stimulate the economy.
The majority of both new and existing loans in China are tied to the one-year Loan Prime Rate (LPR), which serves as the basis for their interest rates. Meanwhile, the five-year LPR has a direct impact on the pricing structure of mortgages. In June, China had previously reduced both the one-year and five-year LPRs as part of its efforts to stimulate the economy
