China cuts interest rates "by surprise" to face the economic slowdown

The

(BPC) has unexpectedly cut two of its main references for loans to the country's banking entities on Monday in an attempt to

of the Asian giant and the difficulties that the sector is going through real estate.

In this way, the Chinese central bank has lowered by ten basis points, to 2% from 2.10%, the rate applied to reverse repurchase operations (repos) with a maturity of seven days, while it has placed in the 2.75% from the 2.85% rate applied to medium-term loans maturing in one year.

In this sense, the People's Bank of China announced that "in order to maintain reasonable and sufficient liquidity in the banking system" it injected 400,000 million yuan (57,791 million euros) through the medium-term loan facility, with 2.75% interest, while it carried out a reverse refinancing operation for another 2,000 million yuan (289 million euros) within seven days.

Capital Economics

China Economist

has called the rate cuts announced by the People's Bank of China a "surprise," though he believes they "will make little difference to liquidity conditions."

Instead, the expert points out that the central bank's main motivation is to "trigger a cut in the lending prime rate" (LPR), set on the basis of quotes linked to the average rate. term, which will reduce interest payments on existing loans, "taking some pressure off indebted businesses" as well as easing the cost of new loans.

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