The State Council announced the reform of the interest rate system on 16 August. It is now mandatory for new loans with tenors of 1 year and above 5 years to choose loan prime rates (LPR) as their benchmark, while the rates of loans with other tenors can be fully determined by commercial banks.
ANZ Research estimated the reform is equivalent to making a 45bp loan rate cut because the PBoC has pledged to breach the "implicit lower bound" that prevents loan rates from falling.
The decline in loan rates bodes well for China's credit demand and growth outlook in 2H to offset the impact of the ongoing trade disputes. However, the reform is unlikely to have a stimulative effect on China's property markets with the authorities still insisting on tight regulations to prevent the crowding-out effect from high home prices.
全新節目《說說心理話》原生家庭對成長有咩影響?改善溝通有計可施?► 即睇