China’s LPR cut signals that rate cuts remain in toolbox

December 20, 2021

 SHANGHAI - China's decision to reduce itsloan prime rate (LPR) has reinforced the ANZ Bank view that Chinese authorities are increasingly open to cutting interest rates amid looming economic headwinds.

In a briefing note, ANZ says the LPR cut will trim China's  interest burden by around CNY80 billion per year starting 2022, in line with a pledge by senior leaders at this year's Central Economic Work Conference (CEWC) to bring forward growth stabilising policies.

"The reduction in bank liability costs contributes to this cut, thanks to the new limits on deposit rates and the RRR cut made in in the later part of 2021," ANZ says.

"The 5-year LPR was left unchanged this time, reflecting the Government's intention not to use the property sector to stimulate economic growth."  (ATI).