China lowers lending criteria to halt economic slowdown

FILE PHOTO: Employees work on the vehicle component production line during a government-organized media tour at a factory of German engineering group Voith, following the outbreak of the coronavirus disease (COVID -19), in Shanghai, China July 21, 2022. REUTERS/Aly Song

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SHANGHAI, Aug 22 (Reuters) – China cut key rates on Monday, adding to easing measures announced last week, as Beijing steps up efforts to boost demand for credit in an economy hampered by a housing crisis and a resurgence of COVID infections.

The one-year loan prime rate (LPR) was cut by 5 basis points to 3.65% at the central bank’s monthly fixing, while the five-year LPR was cut by a larger margin of 15 basis points at 4.30%.

In a Reuters poll conducted last week, 25 out of 30 respondents predicted a 10 basis point reduction in the LPR year on year. All of those surveyed also predicted a five-year term reduction, with 90% predicting a reduction of more than 10 basis points. Read more

Most new and existing loans in China are based on the one-year LPR, which is now loosely linked to the central bank’s Medium-Term Lending Facility (MLF) rate, while the five-year rate influences mortgage pricing.

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Reporting by Winni Zhou and Brenda Goh Editing by Shri Navaratnam

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