An employee counts Chinese yuan in the personal finance business service area of a bank, in east China's Jiangsu province, on September 15, 2023.
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China's lenders cut the country's key five-year lending prime rate for the first time since June, extending Beijing's efforts to revive the country's anemic property market.
China's central bank kept its one-year lending prime rate — the peg for most household and corporate loans in China — unchanged at 3.45%. The key five-year mortgage rate — the peg for most mortgages — was cut by 25 basis points to 3.95%. Tuesday for a report From the People's Bank of China.
The cut in the five-year rate was larger in February's monthly fix than expectations for a cut of five to 15 basis points in a Reuters poll of economists. This was the first time since the last cut of 10 basis points in June.
“The asymmetric moves signal the authorities' continued desire for target easing and its desire to increase support for the asset sector,” said Louis Lu, chief economist at Oxford Economics. “The scale of today's action also reveals – in our view – a genuine concern among Beijing policymakers that the 'incremental' slow-drip of policy easing implemented so far has had little impact.”
“But China's property problem is not ultimately tied to mortgages. Today's action may increase demand at the margins, but should be implemented and viewed in the context of a broader set of measures to manage the inevitable asset correction process,” Lu added.
China calculates its loan prime rates every month after 20 designated commercial lenders submit their proposed rates to the PBOC. These loan prime rates usually move in line with its medium-term policy rate, which the PBOC kept unchanged in February on Sunday.
China cut reserve ratio requirements for its banks by 50 basis points from February 5, providing 1 trillion yuan ($139.8 billion) in long-term capital while urging banks to support loans to high-end real estate developers.
The property market slumped after Beijing cut developers' heavy reliance on debt for growth in 2020, plunging some of its biggest real estate developers into bankruptcy and weighing on consumer growth and broader growth in the world's second-largest economy.
— CNBC's Lee Ying Shan contributed to this story.
