Beijing (AFP)
On Tuesday, the Chinese Central Bank reduced a key lending rate used in pricing mortgages, as Beijing seeks to rescue the real estate market from a worsening crisis and boost the weak growth of the country’s economy. China is facing difficulty in reviving growth, while the country is witnessing a decline in the real estate sector and rising rates. Unemployment among youth, in addition to the global slowdown that affected demand for goods from the second largest economy in the world.
The People's Bank of China announced that the key interest rate on five-year loans was reduced from 4.2% to 3.95%, the first cut since June.
This is the largest interest rate cut since it was implemented in 2019, according to Bloomberg, and is higher than expected by economists surveyed by the financial news agency.
The main interest rate on one-year loans, which is considered a standard for corporate loans, remained unchanged at 3.45%, noting that it was last cut in August.
The Chinese central bank's decision, announced on Tuesday, aims to encourage commercial banks to grant more loans at better interest rates.
This decision contradicts the steps taken by most major economies, which were to raise interest rates in an attempt to reduce inflation.
Last year, China recorded one of the worst annual growth rates since 1990, reducing hopes for a rapid economic recovery after the strict restrictions imposed due to Covid were lifted in late 2022.
In January, the consumer price index fell at its fastest rate in more than 14 years, increasing pressure on the government to take more aggressive steps to revive the economy.
At the heart of the difficulties facing the country is an unprecedented crisis in the real estate sector, which is the main engine of growth and for a long time represented more than a quarter of the gross domestic product.
Financial troubles at major companies such as Evergrande and Country Garden have increased buyers' distrust against the backdrop of unfinished housing projects and falling prices.
For years, many Chinese have considered real estate to be safe investments, but falling prices have hit them hard, and Beijing's support measures have had little impact.
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