The Central Bank Of China Lowered The Base Rate From 4.05% To 3.85%
The People's Bank of China (PBOC) lowered the base interest rate (loan prime rate, LPR) on loans for the year from 4.05% to 3.85% to stimulate the recovery of the economy.
The LPR on loans for the year is lowered for the second time since the beginning of 2020. The regulator expects that this will help reduce the cost of financing for businesses and especially for small companies.
The rate on loans for five years or more has been lowered from 4.75% to 4.65%, the NBK said.
The Chinese Central Bank sets the LPR amount on the 20th of each month based on the rates received from the country's largest banks.
LPR became the new benchmark in August 2019 after the Central Bank's interest rate reform. At the end of last year, the NBK required banks to focus on LPR from 2020 when determining rates on new loans, as well as to bring the terms of existing loans, according to the benchmark in the period from March to August.
Last week, it became known that China's GDP in the first quarter of 2020 collapsed by 6.8% in annual terms - this is the first decline in the Chinese economy since 1992 when the government began to publish these data quarterly. The sharp decline reflected the severe damage caused to the Chinese economy by the COVID-19 coronavirus outbreak and restrictions imposed by the country's authorities to curb its spread.
In January-March, the net profit of China's basic industrial enterprises decreased by 58.8% on an annual basis, said Peng Huagang, a representative of the state property control and management Committee of the State Council of China, on April 20. According to the results of operations in the first quarter of the year, 26 enterprises suffered losses. The operating income of these companies decreased by 11.8%.