China holds loan prime rate steady for fifth month as economy reopens By Investing.com


© Reuters.

By Ambar Warrick 

Investing.com– China held its benchmark lending rates at historical lows on Friday, with the government looking to spur a sharp economic recovery this year after the country marked a decisive pivot away from its strict zero-COVID policy.

The People’s Bank of China maintained its one-year (LPR) at 3.65%, while the five-year LPR, which is used to determine mortgage rates, was maintained at 4.30%.

The LPR is decided by the PBOC based on considerations taken from 18 designated commercial banks, and is in turn used as a benchmark by private banks in offering loans. 

Both short-term and long-term rates are at historic lows, with the PBOC moving to shore up liquidity conditions in an economy that is still reeling from the COVID-19 pandemic.

A lower five-year rate was also aimed at benefiting the country’s cash-strapped real estate sector.

Friday’s move was largely in line with a Reuters poll, and comes as China struggles to shore up economic growth in the face of its worst-yet COVID-19 outbreak. The government has also outlined a slew of spending measures to support growth. 

While the country began scaling back most of its strict anti-COVID restrictions in December, analysts have warned that rising infections could delay an economic recovery this year. 

Recent data showed that the world’s second-largest economy grew at a from the last year. But it performed better than expected in the , indicating that the lifting of anti-COVID measures was bearing some fruit. 

The PBOC’s reluctance to move the LPR also comes as the central bank aims to maintain a balance between supporting economic growth and maintaining strength in the . The currency had plummeted to 14-year lows after the central bank had unexpectedly cut the LPR in August.

But weakness in the dollar, coupled with expectations of smaller interest rate hikes by the Federal Reserve, saw the yuan mark a stellar recovery against the greenback in recent weeks.

Chinese stocks also rallied sharply on expectations that the economy will bounce back after the lifting of anti-COVID measures. 

 

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