(MENAFN) The People's Bank of China, acting as the central bank, recently announced a significant reduction in its key five-year loan rate, aiming to alleviate mounting pressures on the country's fragile real estate market. Notably, this adjustment did not affect the one-year interest rate, which remained unchanged. The five-year interest rate saw a reduction of 0.25 basis points, now standing at 3.95 percent, while the one-year rate remained steady at 3.45 percent. This move marks the first rate cut of its kind for the five-year period since May and is considered the most substantial reduction in this rate to date, as reported by the Associated Press.
Following the reopening of markets post the Lunar New Year holiday, state-owned banks have unveiled a series of initiatives geared towards extending billions of dollars in loans, with the aim of providing crucial support to real estate developers grappling with excessive debt burdens. The decision reflects a concerted effort to address the challenges plaguing the real estate sector, which has been under strain due to various factors, including economic uncertainties and regulatory measures.
While acknowledging the significance of the rate cut, Julianne Evans-Pritchard from Capital Economics emphasized that this measure alone may not be sufficient to stimulate a significant revival in new home sales. However, she noted that it would help alleviate some of the pressures facing the real estate sector. Coupled with ongoing efforts to provide credit support to developers, the rate cut is expected to provide some relief to the industry, albeit incremental. The move underscores the authorities' commitment to stabilizing the real estate market and promoting sustainable growth within the broader economy.
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