China will release its Loan Prime Rate (LPR) today for January. Facing economic slowdown as a result of the COVID-19
China will release its Loan Prime Rate (LPR) today for January.
Facing economic slowdown as a result of the COVID-19 pandemic, the People’s Bank of China (PBOC) slashed LPRs in 2020 to incentivise growth. The one-year LPR, affecting new and outstanding loans, was reduced to 3.85% from 4.05%, while the five-year LPR, affecting mortgages, was reduced to 4.65% from 4.8%.
Despite the cuts and an otherwise authoritarian pandemic response, China’s GDP grew 2.3% in 2020. Though a vast improvement compared to other major economies, it continues the broader trend of diminishing Chinese GDP growth. Even then, Beijing’s official figures have been met with skepticism, as they seldom fail to meet or approach targets set by Chinese Communist Party (CCP) leadership.
PBOC will maintain current LPRs in the short term as China moves towards a post-pandemic economic recovery. With the one-year LPR set to 3.85%, Beijing is placing a greater emphasis on growth in small-to medium-sized enterprises to stimulate domestic consumption. Still, with large businesses like online retailer Alibaba facing harsh criticism domestically for their exploitative working conditions and internationally for controversial CCP practices, including the suspected genocide of Uighur Muslims in Xinjiang, economic recovery may be more complex than Beijing anticipates. Thus, it is likely PBOC will maintain the LPRs at current rates in the medium-term as well.
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