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China cuts the reference interest rate

A high-rise building is under construction in China. (Photo: CNBC).

People’s Bank of China (PBOC) announced it will cut the basic interest rate for 5-year loans – which is the reference rate for home mortgage loans, from 4.6% to 4.45%. This is the PBOC’s steepest cut since 2019 and much higher than experts forecast.

The PBOC’s move is expected to “support” indebted homebuyers and real estate developers amid the country’s economic slowdown due to the COVID-19 epidemic.

This move to cut interest rates is just one part of the trillion-dollar economic stimulus measures that Beijing expected to be deployed this year to support the economy.

According to Bloomberg calculations of the fiscal and monetary measures announced by the Chinese Government, the Chinese economy will be injected with nearly 5.300 billion USD to stimulate growth.

This is equivalent to nearly a third of the total size of China’s $17 trillion economy, but still lower than the stimulus programs of 2020 when the epidemic first broke out.

Bloomberg forecasts, Beijing is likely to pump more money if the economy does not improve soon. The COVID-19 epidemic and blockade measures, are greatly affecting the ability of the Chinese economy to achieve the target of 5.5% growth this year.

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