Banks in China have cut borrowing costs in the latest attempt to stimulate growth across the Chinese economy. The People’s Bank of China has announced today that its two benchmark lending rates are being cut, by a quarter of 1%. China’s one-year loan prime rate – a reference for loans to businesses and consumers – has fallen to 3.1% from 3.35%. The five-year LPR – the benchmark for mortgages – has been cut from 3.85% to 3.6%. The LPR rates are set by a group of China’s major banks, and today’s reductions show they are passing on last month’s interest rate cut from the PBoC. Some stocks rallied after the cuts were announced, with the Shenzhen SE composite index gaining about 1.4% today. It is the latest in a flurry of attempt to stimulate the world’s second-largest economy, after growth slowed to an 18-month low last week. Last month, China announced wide-ranging measures including interest rate cuts and more liquidity for the banking system. Beijing is attempting a difficult balancing act – trying to revive growth while also implementing structural reforms, and managing financial stability risk. China’s property sector remains in a slump, with sales down sharply this year despite efforts to boost sentiment. While cutting lending rates may provide some help, it will be difficult unless Chinese consumers feel confident enough to borrow – at a time where consumer confidence is near an all-time low. Prices of iron ore futures have risen, partly because of today’s lending rate cuts in China. The most-traded January iron ore contract on China’s Dalian commodity exchange gained 1.5% to trade at 770 yuan (£83) per metric tonne. Meanwhile, in Germany, wholesale inflation has fallen by more than expected. German industrial producers lowered the prices of their products by 0.5% during September, meaning they were 1.4% lower than a year ago. The main reason for the drop in the PPI rate was a decline in energy prices. They were 6.6% cheaper in September 2024 than in September 2023, including a 14.4% drop in prices of mineral oil products. The agenda • 3pm BST: the Conference Board’s leading economic index for the US We’ll be tracking all the main events throughout the day ...
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