China central bank cuts lending rates to spur consumption

• China’s central bank cut key lending rates 20 Jun, including a mortgage-linked benchmark, in a widely expected move to spur investment and consumption after the country’s post-pandemic recovery softened over the last five months.
• Following a monthly meeting, the People’s Bank of China (PBOC) lowered the one-year loan prime rate by 10 basis points to 3.55% from 3.65%, while trimming the five-year rate by 10 basis points to 4.2% from 4.3%. The moves will lower borrowing costs for companies and households.
• The last time the PBOC eased the rates was in Aug 22 after a two-month COVID-19 lockdown in Shanghai took a toll on the economy.
• The cuts reflect growing concern among policymakers over the soundness of China’s recovery.
• The Chinese government has set a growth target of around 5% for 2023, higher than the 3% logged in 2022.
• Key economic indicators, including industrial production and retail spending, slowed in Apr and May 23 after the world’s No. 2 economy posted better-than-expected growth of 4.5% in the first quarter. The jobless rate among youth hit a record 20.8% while real estate investment contracted 7.2% in May 23.
• Most new and outstanding loans in China are based on the one-year loan prime rate, while the five-year rate influences mortgage pricing. The property sector is reeling from scores of housing projects left unfinished by debt-swamped developers.

External Link : https://asia.nikkei.com/Economy/China-central-bank-cuts-lending-rates-to-spur-consumption