The Central Bank of China announced a decrease in the base lending rates to historically low levels, as part of a stimulus package for economic recovery. The rate on one-year loans fell by 25 basis points to 3.1%, and on five-year loans — to 3.6%. The last such decrease occurred in July. The governor of the People's Bank of China, Pan Gongsheng, reported that loan rates will drop by 20-25 basis points on October 21.
In September, the PBOC lowered the reserve requirement ratio for banks by 50 basis points and the base rate on reverse repos for 7 days by 20 basis points, beginning the most aggressive easing since the pandemic started. The average rate for loans was also lowered by 30 basis points. Most loans in China are based on the one-year rate, while the five-year rate affects mortgage pricing.
Since the introduction of the index on September 24, the CSI300 index has broken records for weekly changes, rising more than 14%. At the same time, the yuan fell by 1% against the dollar. Despite the surge, shares began to rally due to the effective support for economic recovery.
Recent data showed that China's economic growth in the third quarter was significantly better than expected; however, investments in real estate fell by more than 10% in the first nine months of the year. Retail sales and industrial production increased in September. Officials expressed confidence that the economy will achieve the projected growth target of around 5% by the end of the year and hinted at further reductions in the reserve ratios of banks by the end of the year.
