The measure is supposed to encourage banks to grant more credits at more advantageous rates, which should, by ricochet, support a rigged activity by the real estate crisis and the reversals of the COVID-19.
Le Monde with AFP
The context of a strong economic slowdown exacerbated by a real estate crisis has pushed Banque Populaire de China, the Chinese Central Bank, to take measures. The monetary institution lowered two of its reference interest rates on Monday August 22, a week after doing the same for several guiding rates.
The Loan Prime Rate (LPR) to one year, which constitutes the reference of the most advantageous rates that banks can offer to companies and households, has been reduced by 3.70 % to 3.65 %, and that At five, a reference for mortgage loans, was lowered from 4.45 % to 4.3 %, the bank announced. These two rates are now at their lowest historical. The LPR at one year had been lowered the last time in January, the one at five years old in May.
The measure is supposed to encourage banks to grant more credits at more advantageous rates, which should, by ricochet, support activity. To support its economy, Beijing had already lowered by surprise last Monday of its key rates: refinancing rates for banks (repo) to seven days and one year.
disappointing economic indicators
The real estate sector, which had served as an engine for recovery after the first epidemic wave in 2020, is in suffering and many groups are short of liquidity, including number one in the sector, Evergrande.
The poor financial health of the truck of real estate penalizes its competitors, buyers showing themselves more and more reluctant to invest in stone. Weakened, some groups are struggling to continue their sites and put in time due to the accommodation sold before their construction. An increasing number of furious owners therefore refuse to pay their monthly payments, at the risk of aggravating the situation in the sector.
These difficulties are added to the epidemic rebounds of COVID-19, which lead to confinements, unexpected closures of factories and businesses, and penalize activity.
In July, China unveiled disappointing economic indicators, notably seeing its economic growth collapsed in the second quarter, up only 0.4 % over a year. This is the worst quarterly performance of its gross domestic product (GDP) since 2020.
The government has set itself the goal this year an increase “about 5.5 %” of its GDP, but many economists doubt that it will be reached.