China cut benchmark lending rates by a bigger-than-expected rate

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Beijing: China's central bank cut its benchmark lending rate to boost economic growth. The Bank of China has announced a rate cut for the first time since June. The People's Bank of China cut the five-year loan prime rate to 3.95% from 4.2%, while the one-year loan prime rate, which serves as a benchmark for corporate loans, was kept unchanged at 3.45%.

The five-year loan prime rate was last cut in June while the one-year rate was last cut in August. Both rates are now at historic lows.

According to the news agency, the loan prime rate was introduced in 2019 and this is the biggest cut since then. According to experts this decline is more than expected. China's decision is in contrast to other major countries where rates have been cut to fight inflation.

Notably, last month, Beijing announced that it would reduce the amount of reserves held by banks, known as the reserve requirement ratio.

China's economy is facing several headwinds and the government has been struggling for months to boost sluggish growth. The Asian country has long grappled with a property-sector crisis, youth unemployment and a global recession.

China's central bank's move to cut lending rates is aimed at encouraging commercial banks to offer more loans and grants at more favorable rates. This is in stark contrast to most other major economies, which are raising rates to curb inflation.

In January, consumer prices fell at the fastest rate in more than 14 years, increasing pressure on the government to take more aggressive measures to revive the country's battered economy.

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