China’s central bank cuts interest rates and sets up loan fund to try to tame its bursting housing bubble

By Yvonne Lan
Fortune Magazine
August 22, 2022
Category: Finance & Economics
Region: International

China’s central bank slashed its key lending rates in a bid to help its ailing economy and deepening real estate crisis. The People’s Bank of China trimmed its five-year loan prime rate by 15 basis points to 4.3%. The central bank already cut the five-year LPR by the same amount in May—the biggest reduction since 2019. …China’s property crisis has worsened in recent months, as hundreds of thousands of homebuyers began protesting and refusing to pay their mortgages owing to stalled and delayed housing projects. The mass mortgage boycotts mean that crumbling consumer confidence could hamper any real estate recovery, “which will eventually ripple through the domestic economy”. Real estate and related industries account for 25% of the nation’s GDP. Trimming interest rates is an attempt to lower interest payments on developers’ outstanding loans, and to decrease the price of new loans. 

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