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China slashes lending rates one week after surprise cuts in key rates

A man looks at his smartphone as he walks past the People’s Bank of China building on May 20, 2022 in Beijing.

Jiang Qiming | China News Service | Getty Images

China slashed its key lending rates again on Monday, one week after it cut two interest rates in a surprise move.

The moves are seen as an attempt to revive credit demand and fire up the economy hurt by extended Covid lockdowns and property debt problems.

The People’s Bank of China cut its five-year loan prime rate by 15 basis points to 4.30% from 4.45%, and lowered its one-year loan prime rate by 5 basis points to 3.65%.

Most new loans in China are based on the one-year LPR.

Last week, the Chinese central bank lowered the rate of one-year medium-term lending facility (MLF) loans to some financial institutions by 10 basis points. It also cut the seven-day reverse repo rate by 10 basis points to 2%.

Positive reactions to last week’s rate changes were short-lived, said analysts such as Navigate Commodities managing director Atilla Widnell.

“Fresh monetary easing/stimulus was seen as futile as ‘flogging a dead horse,’ given that China’s economy desperately needs consumers back on the streets spending money,” he said in a note.

— This is breaking news. Please check back for more updates.

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