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China Announces Historic Cut to Mortgage Rate to Revive Property Market

In a bid to bolster the struggling property sector and stimulate the broader economy, China's central bank has made a record reduction to its key mortgage reference rate.

The People's Bank of China in Beijing cut the five-year loan prime rate on Tuesday.
Officials in China have struggled to kickstart economic growth as they battle a range of headwinds
An elderly man walks past the People's Bank of China in Beijing on August 12, 2015. China cut the yuan's value against the US dollar for the second consecutive day on August 12, roiling global financial markets and driving expectations the currency could be set for further falls. AFP PHOTO / WANG ZHAO (Photo by WANG Zhao / AFP) (Photo by WANG ZHAO/AFP via Getty Images)
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Overview

  • China's central bank slashes the five-year loan prime rate by 25 basis points to 3.95%, marking the largest cut since the rate's introduction in 2019.
  • The rate cut aims to alleviate pressures on the ailing property market, which has been in a downturn since 2021, affecting economic growth.
  • Despite the significant cut, analysts caution that further fiscal and monetary interventions may be necessary to catalyze a meaningful economic rebound.
  • Markets respond positively, with Asian stocks mixed but showing signs of optimism following the announcement.
  • The move is part of a broader effort by China to stabilize its economy, facing challenges such as deflation, low confidence, and accelerated capital flight.