To combat the growing economic recession, China has lowered borrowing rates

To combat the growing economic recession, China has lowered borrowing rates

China’s GDP expanded 8.1 per cent in 2021, according to government figures published earlier this week, but the pace slumped in the final quarter. China’s GDP expanded just 4 per cent in the last quarter of the year compared to a year prior, the slowest pace in a year and a half, The HK Post reported. It further reported that the economists expect the country could struggle even more this year, as the world’s second-largest economy tries to stave off coronavirus outbreaks with its strict zero COVID policy and as the property crisis continues to fester.

According to a media report, China decreased lending rates for the second month in a row as the country grapples with a growing real estate crisis and slower economic growth. The People’s Bank of China dropped its one-year loan prime rate by ten basis points to 3.7 percent on Thursday, the second cut in a month, according to The HK Post. The central bank dropped the benchmark lending rate for the first time since April 2020, when China was in the midst of the original coronavirus outbreak. According to the newspaper, the central bank also dropped its five-year loan prime rate by five basis points to 4.6 percent, the first cut since April 2020.

Averting a collapse of China’s real estate sector is of particular concern in China, said the report. The industry crunch began more than a year ago when Beijing started cracking down on excessive borrowing by developers, a move intended to rein in their high leverage and curb runaway housing prices. But the problem escalated significantly last fall as Evergrande, China’s most indebted developer with some USD 300 billion in liabilities, began warning more urgently of liquidity problems, The HK Post reported. Analysts believe that the real drags on China’s economy are the rising costs of China’s zero-COVID strategy to contain waves of coronavirus, slowing export growth and the worsening property sector. Economists have warned that China’s zero-Covid approach to containing the virus could spell serious problems for the economy in 2022, The HK Post reported.

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