China cuts key mortgage rate to boost economy

BEIJING

China's central bank yesterday cut a key benchmark lending rate used to price mortgages, as Beijing seeks to rescue its housing market from a deepening crisis and boost flagging growth in the country's economy.

China has struggled to kickstart growth as it battles a prolonged property sector downturn, soaring youth unemployment and a global slowdown that has hammered demand for goods from the world's second-largest economy.

The five-year loan prime rate (LPR) was lowered from 4.2 to 3.95, the People's Bank of China announced, in the first cut since June.

It is the largest cut to the rate since it was introduced in 2019, deeper than that expected by economists.

Yesterday's move is aimed at encouraging commercial banks to grant more credit and at more advantageous rates.

They come in stark contrast to most other major economies, where rates have been raised in a bid to curb inflation - part of a global slowdown that is hitting demand for Chinese exports.

China last year recorded one of its worst annual growth rates since 1990, dampening hopes for a rapid economic recovery following the end of draconian COVID restrictions in late 2022.

In January, consumer prices fell at their quickest rate in more than 14 years, piling pressure on the government to make more aggressive moves to revive the battered economy.

At the heart of the country's woes is an unprecedented crisis in real estate, a key engine of growth that has long represented more than a quarter of GDP.

Financial troubles at major firms such as Evergrande and Country Garden have fuelled buyer mistrust against a backdrop of unfinished housing developments and falling prices.