Amid Slowdown, China Cuts Key Borrowing Rate
China has slashed its benchmark reference rate for mortgages by an unexpectedly wide margin, its second cut this year. The country’s economy took a hit after the Chinese regime imposed extreme COVID-19 restrictions, causing huge disruptions to economic activity. The five-year loan prime rate (LPR) has been lowered by 15 basis points to 4.45 per cent, the biggest reduction since China revamped the interest rate mechanism in 2019. The one-year LPR was kept unchanged at 3.70 per cent. Many economists expect China’s economy to shrink this quarter from a year earlier, compared with first quarter’s 4.8 per cent growth. COVID-related stringent measures and mobility restrictions have taken a heavy toll on credit lending, industrial output and retail sales. A key drag on growth has been the property sector. Property and related industries such as construction account for more than a quarter of the economy. China’s property sales in April fell at their fastest pace in around 16 years, while new-home prices declined for the first time month-on-month since December, hurt by weak demand amid wide COVID-19 lockdowns.