Chinese Banks Slash Key Interest Rate

Source: The People’s Bank of China

Chinese lenders slashed the key interest rate for long-term loans, hitting the biggest reduction in three years. MCHI is 1.29% up, while BABA is up 0.69%.

• The five-year loan prime rate was cut down to 4.45% from 4.6%, marking the biggest drop since a revision in 2019.
• The one-year loan prime rate was maintained at 3.7%, versus economists’ expectations of either a five or ten basis point reduction.
• The new rate will take effect for new mortgages immediately but will not take until next year for existing mortgages.
• The decline is expected to increase loan demand amid the impact of COVID-19 lockdowns and the decline in the property sector.
• Strategists believe the rate reduction indicates the focus on support for the property sector, with the unchanged one-year rate unlikely to disappoint.