China cuts lending rates a week after sudden cuts in key rates

A man looks at his smartphone as he walks past the People’s Bank of China building in Beijing on May 20, 2022.

Jiang Kiming | China News Service | Good pictures

China cut its key lending rates again on Monday. A week after two interest rate cuts In a surprise move.

The measures are seen as an attempt to revive the economy and credit demand, which has been battered by extended Covid lockdowns and property credit problems.

The People’s Bank of China cut its five-year lending prime rate by 15 basis points to 4.30% from 4.45% and cut its one-year lending prime rate by 5 basis points to 3.65%.

Most new loans in China are based on one-year LPR.

Last week, China’s central bank cut the one-year medium-term loan facility (MLF) lending rate for some financial institutions by 10 basis points. It cut the seven-day reverse repo rate by 10 basis points to 2%.

Positive reactions to last week’s rate changes were short-lived, analysts such as Atilla Widnell, managing director of Navigate Commodities, said.

“The new monetization/stimulus was seen as futile as ‘beating a dead horse’ as China’s economy forced consumers to spend money and return to the streets,” he said in a note.

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