Chinese authorities have asked the country's biggest banks to lower money rates for the second time in less than a year, marking an escalating effort to boost the world's second-largest economy.
China's state-owned banks, including Bank of China (People's Bank of China), Industrial & Commercial Bank of China (Industrial and Commercial Bank of China) and Bank of Communications (Bank of Communications of China) have been approved. recommends cutting interest rates on a range of products, including demand deposits to 0,05% and 3- and 5-year deposits to at least 0,1%, according to Bloomberg news agency.
Banks are considering the government's (optional) offer, and will probably adjust interest rates as early as this week. The annual interest rates currently applied at these banks are 0,25% for demand deposits, and 2,6% and 2,65% for 3-year and 5-year term deposits.
The cut in deposit interest rates will help reduce the costs of banks, thereby reducing lending rates, attracting consumers and businesses to borrow capital. Lower deposit rates will also discourage consumers from saving cash and investing more.
The headquarters of the People's Bank of China (PBOC), one of the largest central banks in the world, is in Beijing. Photo: Global Finance
Chinese authorities are therefore looking to ramp up lending to fuel the recent slow recovery of the economy due to high unemployment, a sluggish property market and local tensions. increased politics.
After a sudden growth in the first quarter of 2023, new loans began to weaken in April as consumers and businesses limited borrowing. Households are saving more and paying off mortgages, while businesses face falling demand and profits.
According to researcher Zhang Ming at the Chinese Academy of Social Sciences, the country's top government advisory body, low inflation pressures in China will create opportunities for monetary easing in the near term. .
China will likely look at further rate cuts, Zhang said, and target a reduction in the reserve requirement ratio (RRR) to lower lending costs.
Meanwhile, Zheshang Securities chief economist Li Chao also predicted the possibility of rate cuts and RRR cuts in the second half of this year. He expected the US Federal Reserve (Fed) to start cutting interest rates in the fourth quarter, creating more room for Beijing to ease monetary policy.
China cut its RRR for the first time in 2023 in March, but kept its prime lending rate unchanged. The widening interest rate differential with the US has significantly limited the scope of this country's monetary easing.
Nguyen Tuyet (According to Bloomberg, Reuters)
