Experts assume that China will not be able to maintain GDP growth in the long term.
(Photo: AP)
Tokyo, Shanghai China has lowered interest rates in its fight against an economic slowdown. The central bank People’s Bank of China (PBoC) on Thursday lowered the reference rate for loans with a one-year term (LPR) to 3.70 percent from 3.80 percent in the previous month. The interest rate for a five-year term was also reduced to 4.60 percent from 4.65 percent. This is the first drop since April 2020.
The LPR is set on the 20th of each month. Most loans in China are based on one-year interest rates, with five-year interest affecting mortgages. The LPR is linked to the reference interest rate for medium-term loans to certain financial institutions (MLF), which the PBoC surprisingly lowered to 2.85 from 2.95 percent on January 17.
In spite of the real estate crisis, the Chinese economy recovered significantly in 2021 from the Corona lull in the previous year. According to official figures, gross domestic product (GDP) grew by 8.1 percent. After the publication of the GDP data, however, experts assumed that this pace could not be maintained in the long term. According to an economist survey by the Reuters news agency, China’s economy will grow by 5.2 percent both this year and next.
The rate cut encouraged investors in Asia to buy equities on Thursday. Tokyo’s leading index, the Nikkei, rose by 1.1 percent to 27,772 points. The broader Topix index gained one percent. The Shanghai stock exchange was 0.1 percent lower, burdened by profit-taking.
Top jobs of the day
Find the best jobs now and
be notified by email.
In contrast to China, however, other large economies are ready to tighten their monetary policy. Chinese property values rose after Reuters, citing insiders, reported that China is making it easier for developers to access funds from sales.
After the slide to a five-month low, bargain hunters in particular were on the move on the Japanese stock market. “The Nikkei has fallen to a level where it looks cheap, enticing investors to take advantage of the pullback and jump in,” said a trader at a domestic securities firm. Sony partially recovered from Wednesday’s slide and gained 5.8 percent. Titles from games maker Nintendo rose by 2.8 percent.
More: These are the top five risks to the Chinese economy