By Ambar Warrick
Investing.com–China’s lending rates hit historic lows on Friday, with the government looking to spur a strong economic recovery this year after marking the the country a far cry from its zero-COVID policy.
The People’s Bank of China maintained its one year high quality loans (LPR) at 3.65%, while the five-year LPR, which is used to determine mortgage rates, remained at 4.30%.
The LPR is determined by the PBOC based on evaluations made from 18 selected commercial banks, and is used by private banks in offering loans.
Short-term and long-term rates are at historic lows, with the PBOC moving to maintain monetary conditions in an economy reeling from the COVID-19 pandemic.
The five-year low was also intended to benefit the country’s real estate sector.
Friday’s move was largely in line with a Reuters poll, and comes as China struggles to support economic growth in the face of the worst-ever outbreak of COVID-19. The government has also announced more spending to support growth.
As the country began easing many of its COVID-19 restrictions in December, analysts warned that an increase in infections could delay economic recovery this year.
The latest data showed the world’s second largest economy growing at slow down significantly in 2022 from last year. But it was better than expected fourth quarter of 2022to indicate that the increase in measures against COVID was fruitful.
The reluctance of the PBOC to raise the LPR also comes because the central bank aims to maintain a balance between supporting economic growth and maintaining the strength of the yuan. The currency fell to a 14-year low after the central bank unexpectedly cut the LPR in August.
But the weakness in the dollar, along with expectations of small interest rate hikes by the Federal Reserve, has seen the yuan mark a further recovery against the greenback in recent weeks.
Chinese stocks also increased on expectations that the economy will recover after the lifting of anti-Covid measures.
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