Monday, July 13, 2020
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China Central Bank lowers key rate

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The Central Bank of China has lowered key rates to support the economy affected by the coronavirus.

The annual loan rate for first-class borrowers (LPR) was reduced from 4.05% to 3.85%, the five-year rate affecting the cost of mortgage loans was reduced from 4.75% to 4.65%.

The Central Bank of China has lowered the rate on loans issued under the framework of Medium-term Lending Facility (MLF) in order to reduce the cost of borrowing for companies amid the outbreak of coronavirus.

The People’s Bank of China said that the interest rate on one-year MLF loans has been reduced by 20 basis points from 3.15% to 2.95%, the lowest level since the introduction of the liquidity instrument in September 2014. The regulator provided loans for a period of one year in the amount of 100 billion yuan ($14.19 billion) under the MLF.

China’s GDP in the I quarter of the year fell for the first time in 28 years – by 6.8% to 20.65 trillion yuan, the National Statistical Bureau of China reported.

The net profit of industrial enterprises in China decreased in the I quarter compared to the same period in 2019 by 58.8% due to quarantine and the epidemic of coronavirus.

Revenues of Chinese state-owned enterprises of central subordination decreased by 11.8% year on year to 6 trillion yuan (about $857.14 billion).

Over 80% of central state-owned enterprises faced a decline in revenue for the quarter. But in March, most of them improved the result after resuming work: their revenue grew to the level of January 2020 – 2.2 trillion yuan.

The utilization rate of production capacities in China’s industry fell to 67.3% from 75.9% in the same period of the previous year, the National Bureau of Statistics of China calculated.

In the previous quarter, from September to December 2019, the Chinese economy grew by 6%. According to the estimates of the National Bureau of Statistics, the decline in GDP in the I quarter compared to the previous one was 9.8%.

The Bureau of Statistics notes that the country is facing tremendous pressure amid growing uncertainty and instability due to the outbreak of coronavirus. In addition, China has new difficulties and problems in the resumption of work and production.

The world’s second largest economy stopped earlier this year when Beijing imposed large-scale restrictions and quarantines to stop the spread of the outbreak of coronavirus that began in Wuhan.

In Q1, retail sales in China fell 19%. Industrial production during the same period fell by 8.4%. Previously, China also reported a sharp decline in exports and production activity.

Further negative pressure on the PRC economy is exerted by the further spread of coronavirus, which has disrupted the supply chains around the world and significantly reduced the demand for many products.

Lena S.
Lena is an adventurous soul searching the world for truth and balance. She is a mother of 2 beautiful daughters and a full time writer for Financial News where she covers various topics from finance, government, politics, current events, crypto and technology.

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