China Jan new bank loans jump to 3.34 trln yuan, above forecast

Andrew Cummings
February 21, 2020

The PBOC (People's Bank of China) has lowered its benchmark lending rates in a bid to lowering financing costs for businesses and bolster the economy.

The virus outbreak has disrupted global supply chains and caused widespread disruption to businesses and factory activity in China, prompting authorities to introduce a steady stream of policy measures over recent weeks to support the economy by cushioning the impact of the epidemic which is centred on Hubei province.

Analysts had widely expected the move, with all 51 polled by Reuters predicting it.

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The central bank cut its LPR benchmark interest rates for one and five-year loan terms by 10 basis points and 5 basis points respectively to 4.05% and 4.80%.

The lower LPR, based on rates of the central bank's open market operations and released on a monthly basis, is in line with market expectations as China continues to inject market liquidity to buffer the blow from the novel coronavirus outbreak. China's yuan weakened to a more than two-month low against the dollar after the LPR cut, mainly pressured by further easing expectations.

China's banking sector may face a surge of up to 7.7 trillion yuan ($1.10 trillion) of non-performing loans (NPLs) in 2020 if the coronavirus outbreak doesn't peak until April, credit agency S&P Global estimated on Thursday.

Thursday saw the Chinese government report a slowdown in the number of new cases of infection.

When compared with a year earlier, first-quarter growth could slump to 4.5% from 6.0% in the fourth quarter, according to the latest Reuters poll.

Earlier this month, the central bank cut the rates on its short-term funds and one-year loans to commercial lenders.

Economists expect Beijing to roll out more easing measures to help the economy, which has been hit hard by the epidemic.

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