by Ambar Warrick
Investing.com–The People’s Bank of China (PBoC) cut lending rates for a second week on Monday, as it struggles to shore up economic growth during the COVID-19 lockdown and is brewing real estate and energy crises.
The bank lowered its one-year benchmark Lending Prime Rate (LPR) to 3.65% from 3.7%, while its five-year LPR was cut to 4.3% from 4.45%, it said in a statement. Last week cut two other benchmark rates .
The yuan fell after the decision, down 0.1 percent to 6. 8239 Exchange rate against the US dollar – this is the lowest level in nearly two years. The currency has fallen steadily this year in the face of weak economic trends.
Chinese banks use LPR as a benchmark for charging interest rates to their best customers, and the People’s Bank of China uses the suggested interest rates provided) to set LPR commercial banks. The one-year rate is used for new and outstanding loans, while the five-year rate affects home mortgages.
The rate cut by the People’s Bank of China reflects the central bank facing a sharp slowdown in economic growth this year.
A string of weaker-than-expected economic data from China in July means the economy may contract for the month after barely expanding in the second quarter.
Most of them have been triggered by several coronavirus 19 lockdowns this year under Beijing’s strict zero-corona virus policy. This has led to the suspension of activity in several major economic centers, including Shanghai.
But a brewing debt crisis in China’s sprawling real estate market has also sparked more fears of an economic slowdown. Mortgage boycotts by Chinese clients over unfinished projects have exacerbated those concerns.
The country is now facing a severe power crunch in Sichuan province, which has led to the closure of several factories in the Sichuan area.
