An employee counts Chinese yuan at the bank's personal finance business service area in Hai'an, east China's Jiangsu province, on September 15, 2023.
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Chinese lenders cut their key interest rate on five-year loans for the first time since June, expanding Beijing's efforts to revive the country's weak real estate market.
China's central bank left its key one-year loan rate – the peg for most household and business loans in China – unchanged at 3.45%. The benchmark five-year loan rate – the peg for most mortgages – was cut by 25 basis points to 3.95%, according to To Tuesday's statement From the People's Bank of China.
The five-year interest rate cut in February's monthly reform was larger than expectations for a five- to 15 basis point cut in a Reuters poll of economists. It was also the first since it was last cut in June by 10 basis points.
“The asymmetric moves indicate the authorities’ continued preference for targeted easing and their desire to increase support for the real estate sector,” said Louise Law, chief economist at Oxford Economics. “The scale of today’s action also reveals – in our view – a real concern among policymakers in Beijing that the slow trickle of policy easing implemented so far has had little impact.”
“But China’s real estate problem is not ultimately related to mortgages,” Lu added. “Today’s move could boost margin demand, but must be implemented and viewed in the context of a broader range of measures to manage the inevitable property retracement.”
China calculates the base interest rates on its loans every month after 20 designated commercial lenders submit their proposed interest rates to the People's Bank of China. Base loan rates typically move in tandem with the medium-term interest rate, which the People's Bank of China left unchanged for February on Sunday.
China lowered reserve ratio requirements for its banks by 50 basis points effective February 5, freeing up 1 trillion yuan ($139.8 billion) of long-term capital, while urging banks to support loans to high-quality real estate developers.
The property market slumped after Beijing cracked down on developers' heavy reliance on debt for growth in 2020, bankrupting some of its biggest property developers and impacting consumer growth and broader growth in the world's second-largest economy.
CNBC's Li Yingshan contributed to this story.
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