China moves lending rates slightly lower with new benchmark
(20 August 2019 – China) China lowered its new lending reference rate, as expected, as the central bank kicked off interest rate reforms designed to reduce corporate borrowing costs in the world’s second-largest economy.
The People’s Bank of China on Tuesday set the revamped loan prime rate (LPR) at 4.25 per cent — just 6 basis points below the previous level, but in line with its stated goal of bringing the rate more closely in step with its medium-term lending facility for one-year loans, which stands at 3.3 per cent.
When it announced the LPR at the weekend, the PBoC said the new lending benchmark was intended to “deepen reform of interest rate marketisation, improve the efficiency of interest rate transmission and promote reduced financing costs for the real economy”.
Beijing is requiring all new bank lending to be benchmarked against the LPR, but existing loans — including Rmb27 trillion ($3.8 trillion) in long-term mortgage loans — are exempted, which could limit the LPR’s impact.
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