Market Updates
China Hopes Rate Cut Will Revive Economic Activities
Brian Turner
20 May, 2022
New York City
China unexpectedly lowered its mortgage reference rate today hoping to revive the flagging housing market.
The People's Bank of China held its one-year loan prime rate at 3.7% but lowered its five-year loan, reference rate for mortgage lending, to 4.45% from 4.60%.
The rate cut was the largest since the rate structure was revised by the central bank in 2019 and was second after the rate was trimmed in January.
In January, the central bank lowered one-year and five-year rates after home prices and sales fell.
Home prices declined again in April compared to March.
The latest rate cut follows the central bank's lowering of the mortgage rate floor for the first-time home buyers over the weekend.
The central bank is looking to revive moribund housing market and spur more economic activities as the nation is struggling with Covid-19 stringent restrictions and lockdowns in many regions.
Stocks of builders changed little after the rate cut suggesting that the rate cut may not be enough but broader market indexes welcomed the move.
The Shanghai Composite Index gained 1.6% to 3,146.57 and the Hang Seng Index rose 3% to 20,717.24.
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