PBOC lowers reference lending rate as Shanghai continues its financial development
August 28, 2019 Category China News Round-up, Weekly
The People’s Bank of China (PBOC) lowered its lending reference rate to 4.25% from 4.35% through a new market-oriented pricing mechanism, providing a modest easing of monetary conditions. The Chinese central bank now requires banks to benchmark their loan rates against the medium-term lending facility (MLF) instead of the official benchmark rate, which can only be changed with the approval of the central government. The PBOC will now have a bigger say in setting lending rates. The one-year loan prime rate (LPR), which is the average of the rates that 18 designated banks charge their biggest clients, was previously set at 4.31%. The decline is not big, so its short-term impact will be limited, especially when participating banks have no strong incentives to lower their rates.
The change by the PBOC, a reform of its interest rate setting mechanism rather than an outright cut in its reference rates, followed steps taken by foreign central banks to cut their official interest rates to bolster economic growth. By basing the main lending reference rate against market rates, the PBOC hopes that commercial banks will provide more credit to small businesses while also lower their fundraising costs, the South China Morning Post reports.
China Banking and Insurance Regulatory Commission’s Shanghai Bureau unveiled a set of new measures to boost the city’s financial technological development and its efforts toward becoming an international innovation center. The newly announced measures aim to lend support to Shanghai’s major projects, including the construction of the new Lingang area of the China (Shanghai) Pilot Free Trade Zone, the STAR Market board, the Yangtze River Delta regional integration program, as well as the brand building of “Made in Shanghai”, the Shanghai Daily reports.
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