China unveils rate reform to help lower firms’ borrowing costs

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Aug 19, 2019 06:00 am

BEIJING China's central bank unveiled a key interest rate reform on Saturday to help steer borrowing costs lower for companies and support a slowing economy that has been hurt by a trade war with the US.

The People's Bank of China said it will improve the mechanism used to establish the loan prime rate (LPR) from this month, in a move to further lower real interest rates for companies as part of broader market reforms.

Analysts say the move, which came after data that showed weaker than expected growth last month and followed a Cabinet announcement on Friday, underscores the government's attempts to use reforms to support a slowing economy.

"By reforming and improving the formation mechanism of the LPR, we will be able to use market-based reform methods to help lower real lending rates," the central bank said in a statement.

The central bank will "deepen market-based interest rate reform, improve the efficiency of interest rate transmission, and lower financing costs of the real economy".

It added that Chinese banks' new LPR quotations will be based on rates of open market operations. - REUTERS