China’s banks have slashed a key interest rate in a token gesture to revive the world’s second-largest economy.
The country’s central bank said yesterday the one-year loan prime rate offered by banks was cut to 3.65 per cent from 3.7 per cent, while the five-year rate dropped to 4.3 per cent from 4.45 per cent.
The figures are compiled by the central bank analysing rates set by some of China’s largest banks.
The move comes after China’s central bank unexpectedly slashed its key interest rate 10 basis points to support the economy earlier this month.
Analysts said lower rates are unlikely to lead to an uptick in demand for loans due to consumers fretting over Beijing’s future reaction to Covid-19 outbreaks.
Chinese authorities have strictly followed a “zero-Covid” policy, which has seen them impose blanket lockdowns on some of the country’s main trading hubs.
Shutting down businesses and ordering households to stay at home has dampened confidence, spending and investment.
Those tough measures have hit the country’s economy hard. China recorded its weakest annual growth in two years in the second quarter, with output jumping just 0.4 per cent compared with a year earlier.
Lawmakers have effectively ditched their 5.5 per cent annual GDP growth target.
Underlying weakness in the Chinese economy has hit a raft of activity.
Property prices slid 0.11 per cent over the last month, driven by prospective homeowners scrapping purchases over fears houses will not be complete for months.
Chinese homeowners last month stopped paying developers due to their properties being partly complete.
Uncertainty over whether homebuyers will make payments has weighed on real estate investment, choking overall fixed asset spending, which has slowed to 5.7 per cent growth.
A weaker Chinese economy adds to the list of headwinds buffeting western countries, particularly those with large industrial sectors.
China is one of the world’s largest commodity consumers, meaning a downturn will hit income flowing into western countries through metal and other raw material sales.