China cuts short-term interest rates slightly in latest bid to help companies hit by US trade war

One-year loan prime rate set to 4.20 per cent from 4.25 per cent following rate reductions by US Federal Reserve and European Central Bank last week

But China left five-year prime rate, used as reference for mortgage loans, unchanged in further move to keep property prices under control

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The People’s Bank of China can influence the loan prime rate through the rate it charges on its medium-term lending facility (MLF), which it uses to lend Chinese banks extra liquidity at low cost. Photo: Reuters

Published: 1:10pm, 20 Sep 2019Updated: 11:05pm, 20 Sep 2019

China trimmed its market reference rate for new short-term bank loans on Friday, taking another step towards helping companies hit hardest by the trade war with the United States and the overall domestic economic slowdown.

The September loan prime rate, the average taken from 18 selected commercial banks, was set at 4.20 per cent for one-year maturities, down from the 4.25 per cent set in August, according to the National Interbank Funding Centre, a unit of the People’s Bank of China (PBOC).

The five-year prime rate, generally used as a reference rate for new mortgage loans, was kept unchanged at 4.85 per cent, the centre said.

It follows the European Central Bank cutting its benchmark rates to minus 0.5 per cent last week while also restarting quantitative easing, and the US Federal Reserve announcing a cut of 25 basis points on Wednesday.

Analysts expect a further gradual reduction in Chinese interest rates in coming months as part of the government’s attempt to support economic growth without rekindling financial risks from excessive debt accumulation.

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