The move has been predicted since China’s October economic data was disappointing. Specifically, the 1-year basic lending interest rate decreased from 4.20% in October to 4.15%, according to the announcement of the Central Bank of China (PBoC).

The 5-year term interest rate applied by banks based on the mortgage interest rate decreased from 4.85% to 4.80%.

Last August, the Central Bank of China announced a plan to adjust basic lending rates to keep pace with market movements better. Accordingly, the basic lending interest rate is announced on the 20th of every month based on the open market operation of the central bank, especially the medium-term lending interest rate tool.

This is the latest in a series of measures China has taken to reduce borrowing costs and free capital for economic sectors that are thirsty.

China is trying to activate the economy showing signs of slowdown, with growth in the third quarter of 2019 plunging for nearly three decades due to the impact of the trade war with the US causing global demand for goods to decline. reduction.

China’s central bank yesterday unexpectedly lowered the interest rate of the 7-day reverse repurchase contracts from 2.55% to 2.05% in order to encourage commercial banks to "inflate" their capital. for small and medium businesses .

Julian Evans-Pritchard, an expert at independent economic research and consulting firm Capital Economics (UK), said that lowering the basic interest rate will have a small impact on the Chinese economy because this move will not help. Lower interest rates on outstanding loans are subject to the previous interest rate policy of the Central Bank of China.

Lowering the basic interest rate for 5 year period can be considered as a move to loosen credit for real estate , limiting the price bubble of this market, Julian said.