Chinese banks have again reduced borrowing costs as a signal of PBOC easing

Chinese banks have again reduced borrowing costs as a signal of PBOC easing

Chinese lenders lowered acquiring costs for a second straight month after the national bank cut policy loan rates and pledged more easing to settle the economy. The one-year loan prime rate was sliced by 10 basis points to 3.7% on Thursday, in accordance with estimates in a Bloomberg review of economists. The five-year rate, a reference for long term loans including mortgages, was lowered by 5 basis points down to 4.6%, a more modest decrease than anticipated.

A crackdown on the property market last year has roiled the economy and financial markets, prompting the central bank to pivot to easing mode, with interest rate cuts and pledges to open its policy tool box wider. The smaller-than-expected cut in the five-year loan rate suggests authorities are still cautious about the property market.

The LPRs, which are the de facto benchmark lending rates, are based on quotes that 18 banks offer their best customers and are submitted to the People’s Bank of China. The one-year rate usually moves in lockstep with the one-year medium-term lending facility rate, which the PBOC cut by 10 basis points Monday, the first reduction in almost two years.

“A smaller cut, in my opinion, signals that policy makers are in no rush to relax measures on property financing,” said Hao Zhou, senior emerging market economist at Commerzbank AG. “The property policy is still under spotlight for now, and some hesitation from the policy makers indicates that the debt concerns are still clouding.”

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