Beijing, April 20 (IANS) China on Monday cut its benchmark lending rate for the second time this year to reduce corporate borrowing costs and ease the impact of the coronavirus crisis on the worlds second-largest economy.
The People’s Bank of China lowered the one-year loan prime rate by 20 basis points to stand at 3.85 per cent from 4.05 per cent previously, reports Efe news.
The central bank revamped the LPR mechanism in August 2019.
The plan to reform the LPR mechanism last year sought “to better reflect market changes in its latest move to guide borrowing costs lower to support the real economy”, according to Xinhua news agency.
The move is to support the businesses affected by weak domestic demand due to the widespread impact following the coronavirus crisis.
Economics research consultancy Capital Economics said in a statement that the rate cut was on expected lines following the recent variations in the medium-term lending facility announced on April 15 when the bank reduced it to 2.95 per cent from 3.15 per cent.
In March, several economic indicators from January and February reflected a decline in China as the pandemic paralyzed the country.
The impact of the coronavirus crisis on the economy led China to mark a 6.8 per cent decline of its GDP in the first quarter of the year for the first time in four decades.
However, experts have predicted a slower-than-decline recovery in the coming months.
Beijing’s aim is not to enter into a recession, which pushes China into recording positive year-on-year growth in the second quarter of 2020.
The global pandemic originated in China’s Wuhan city last December. It has so far infected 83,817 people and killed 4,636 others.