According to Bloomberg, the People’s Bank of China announced on Friday that it would cut the key interest rate for long-term loans.

The central bank stated it would lower the five-year loan prime rate, a reference for home mortgages, to 4.45% from 4.6%. This is the largest cut since 2019.

The move is an effort to help the crippled property sector and boost loan demand as the second-largest economy was hit hard by its strict Covid lockdown measures.

Frances Cheung, strategist at Oversea-Chinese Banking Corp in Singapore, told Bloomberg, “The cut in the five-year LPR [loan prime] rate reflects the focus on supporting the property sector, in line with the recent relaxation measures.”

China’s property industry has been in a debt crisis after the Chinese regime cracked down on the sector last year, causing multiple defaults. Many China’s real estate developers have missed debt payments, including giant Evergrande Group.

On Thursday, Nikkei reported that its land revenue dropped 38% year-on-year in April. This is the largest decrease in over six and a half years. Housing sales also fell more than 40% year-on-year in April.

China remains under pressure as its official April data this week showed a grim economic outlook, reflecting that Covid-fighting measures have hit the economy harder than expected.

According to Bloomberg, China plans to boost its growth by pumping about 5.3 trillion dollars into the economy this year.

Beijing set the 5.5% growth target for 2022. However, the authorities still keep Covid-fighting measures that slow down the economy, raising skepticism among experts for achieving both.

Economists told Bloomberg that besides stimulus from the monetary policy, the fiscal policy still has a lot of room for boosting the economy. Data from Bloomberg shows that total support from the fiscal stimulus this year has reached 4 trillion dollars.

However, much of the stimulus package was introduced at the annual session of the National People’s Congress in early March, before the latest outbreak in late March. This suggests that Beijing might need more measures for the rest of this year.

Earlier this month, international credit rating agencies, Fitch Ratings and S&P, both downgraded China’s 2022 growth forecasts to just above 4%.

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