The People's Bank of China announced that for the first time since the beginning of the pandemic, it lowered loan prime rate. The annual loan rate was reduced to 3.8% from 3.85% (for the first time since April 2020), while the five-year loan rate remained at 4.65%. The five-year rate has remained unchanged since April 2020. Some economists predict a reduction in the five-year rate in the near future, which will slightly reduce the cost of mortgage loans and help the authorities' efforts to maintain demand for housing.
The loan prime rate is fixed monthly based on the submission of 18 banks, though Beijing has influence over the rate-setting. This lending rate replaced the central bank's traditional benchmark lending rate in August 2019.
Last week, the People's Bank of China announced a reduction in the reserve requirement ratio (RRR) for financial institutions, which was the second such step this year.
But despite the measures taken, economic growth has slowed since July, which was due to weak consumer spending, Beijing's zero tolerance policy for coronavirus and stricter regulatory requirements in the real estate sector. In early December, the government announced that in 2022 more attention will be paid to stability.