BEIJING: China has conducted some policy rate adjustments in a bid to expedite economic recovery. The People’s Bank of China, the country’s central bank, slashed the interest rate of the one-year medium-term lending facility from 2.65% to 2.5%, injecting 401 billion yuan (nearly $55.64) into the market.
At the same time, the PBOC conducted 7-day reverse repos valued at 204 billion yuan at an interest rate of 1.8%, down from 1.9%. It slashed the 7-day and one-month interest rates on its standing lending facility all by ten basis points to 2.65%, 2.8% and 3.15%, respectively, according to Xinhua.
Wang Qing, an analyst at Golden Credit Rating, said that the interest rate lowering is to reduce the financing expenditure for the real economy and prevent funds from circulating in the monetary market for the purpose of arbitrage.
China’s yuan-denominated loans
China’s yuan-denominated loans increased by 345.9 billion yuan last month, dropping by 349.8 billion yuan from the corresponding period in 2022, and industry insiders believe that it shows that the foundation for economic recovery requires further consolidate besides seasonal factors.
As the MLF interest rate commonly acts as the loan prime rates’ anchor, the pricing reference for bank lending, analysts predict that the LPRs could to be lowered this month.
Zhang Xu, an analyst with Everbright Securities, said that the slight decrease would be beneficial to monetary credit growth, promoting the drop of the comprehensive financing expenditures for enterprises and the credit rates for residents while keeping them stable overall.
