Coronavirus: China’s benchmark loan rate cut another sign authorities are ‘serious about monetary easing’
- The one-year loan prime rate (LPR) was lowered by 20 basis points to 3.85 per cent, while the five-year LPR was cut by 10 basis points to 4.65 per cent
- Last week, it was confirmed China’s economy shrank 6.8 per cent in the first quarter from a year earlier
China cut its benchmark lending rate as expected on Monday to reduce borrowing costs for companies and prop up the coronavirus-hit economy, after it contracted for the first time in decades.
The one-year loan prime rate (LPR) was lowered by 20 basis points to 3.85 per cent from 4.05 per cent previously, while the five-year LPR was cut by 10 basis points to 4.65 per cent from 4.75 per cent.
All 52 participants in a Reuters survey had expected a reduction in the LPR at its monthly fixing. Most had forecast a 20 basis points cut in the one-year rate, but a more modest 5-10 basis points in the five-year as Beijing tries to keep a lid on property prices.
It is easy to dismiss such a small fall in borrowing costs as insignificant for struggling firms. But the [People’s Bank of China] has been easing monetary conditions through a range of other tools recently, too
“It is easy to dismiss such a small fall in borrowing costs as insignificant for struggling firms. But the [People’s Bank of China] has been easing monetary conditions through a range of other tools recently, too,” said Martin Rasmussen, China Economist at Capital Economics.